The Quick Read: A home equity line of credit runs in two stages: a draw period, when you borrow against the line and usually owe only interest on what you’ve used, and a repayment period, when borrowing stops and every payment includes principal, so the monthly bill typically steps up on a set date.
- The draw period is the borrowing window. Interest-only payments are the norm, and principal payments are optional.
- The repayment period is the payoff window. The line closes to new borrowing and the balance amortizes, meaning it shrinks with each payment.
- Both lengths come from your contract. Across the broader market, a 10-year draw followed by up to 20 years of repayment is common, per NerdWallet.
- Investment-property lines in Lendmire’s wholesale network run a 5-year interest-only draw and a 25-year fully amortizing repayment, subject to lender guidelines.
- A rental HELOC payment sits outside the DSCR ratio on your other loans. It is a real cost the ratio never sees.
What Is a HELOC, and Why Does It Have Two Phases?
A HELOC is a revolving credit line secured by property you own. Think of a credit card with a much larger limit and your real estate behind it. The lender approves a maximum, and you borrow what you need, when you need it.
How large a line the equity supports.
An equity line is sized by combined loan-to-value, occupancy, and credit — not by rental coverage. Switch the occupancy or the credit band and the ceiling moves with it.
Investment-property lines require a 700 minimum credit score; second-home lines start at a 640 minimum and primary-residence lines at 600, and the combined-LTV ceiling steps down as the credit band drops on primary-residence and second-home lines and holds on investment-property lines; the line cap steps down on primary-residence lines and holds at every tier on investment-property and second-home lines.
A debt-to-income ratio above 45% requires 680+ credit. Profiles under 640 are limited to single-family homes. At least 75% of the approved line is drawn at closing. Ceilings, floors, and caps update from Lendmire’s centralized guideline source.
Line estimate
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. The rate is an editable assumption; equity-line pricing is variable through both the draw and repayment periods and never converts to fixed. Occupancy and credit drive the ceiling together: an investment property tops out at 70% combined LTV (minimum credit 700, line cap $500,000); a second home tops out at 90% combined LTV (minimum credit 640, line cap $500,000), with the ceiling stepping down as the credit band drops (the cap holds at every tier); a primary residence tops out at 90% combined LTV (minimum credit 600), and its $750,000 maximum line is available only at 75% combined LTV or below with a 700-or-better credit profile (720 on the longer-runway program) and a full appraisal. Lines above $500,000 require a full appraisal. Credit, debt-to-income, property type, and full underwriting review all affect the final line.
The two phases exist because the lender wants a plan to get repaid. The draw period gives you flexibility. The repayment period forces the balance down to zero. The switch happens on a date written in your agreement, not when you feel ready.
Across our wholesale network, these lines are standalone products. They sit in first or second lien position and don’t touch your existing mortgage. Lines run from $25,000 to $750,000. On an investment property, the line caps at $500,000, and the minimum credit profile is 700. Everything here is subject to lender guidelines and full file review. This is not a commitment to lend.
Key Terms Defined
Draw period: The stretch of time when you can borrow against the line, repay, and borrow again within the limit.
Repayment period: The stretch after the draw ends, when you can no longer borrow and the balance is paid down with principal and interest.
Interest-only payment: A payment that covers only the cost of borrowing. It does nothing to shrink the balance.
Amortization: Paying a balance down in regular installments so it reaches zero at the end of a set term.
CLTV (combined loan-to-value): All loans secured by the property, added together, divided by the property’s value.
Balloon payment: A structure where the whole remaining balance comes due at once instead of amortizing.
DSCR (debt service coverage ratio): Monthly rent divided by the monthly principal, interest, taxes, insurance, and any HOA dues on a rental.
How the Draw Period Works
The draw period is the flexible phase. You can pull funds, pay them back, and pull them again. Interest accrues only on the balance you’ve drawn, not on the full limit. Payments are usually interest-only, and principal payments are allowed but optional, as NerdWallet’s HELOC explainer describes.
Pricing on a HELOC floats with an index. So even though you owe only interest, that payment moves with the market and with how much you’ve drawn.
Here’s the part new investors miss. Paying down principal during the draw generally restores your available credit. Interest-only payments don’t. A line used to buy a rental and never paid down leaves the same balance sitting there on the last day of the draw.
Network lines add a wrinkle. At least 75% of the line is drawn at closing. The line is meant to be used, not held as a standby. After closing, the minimum for each additional draw is $1,000 on the longer-runway line.
That “longer-runway” label is shorthand for the 5-year draw and 25-year repayment structure. The higher-leverage option, offered on primary residences and second homes, uses a 3-year draw and a 17-year repayment. Where the two differ, each figure applies only within its own program’s terms.
How the Repayment Period Works
Repayment starts on a fixed date. Borrowing stops, and Experian confirms you can no longer draw once repayment begins. The balance on that date gets locked in. The lender then recalculates your payment so the full balance amortizes over the repayment term.
Three things set how big the new payment is:
1. The balance at the end of the draw.
2. The length of the repayment term. A shorter term means a bigger payment.
3. Whether pricing floats.
On network lines, pricing floats through both phases and never converts to fixed. Some lenders in the broader market offer a conversion option. These lines don’t.
Repayment is a separate clock from the draw. It doesn’t restart because you paid something down. Paying down early shrinks the balance that has to be amortized. It doesn’t change the term.
Draw Period vs. Repayment Period at a Glance
| Factor | Draw Period | Repayment Period |
|---|---|---|
| Borrowing | Open up to the limit | Closed |
| Required payment | Usually interest-only | Principal plus interest |
| Paid-down principal | Generally restores credit | Does not restore credit |
| Pricing | Floats on network lines | Floats on network lines |
| Main risk | Balance never shrinks | Payment steps up |
Draw and Repayment Lengths: Market vs. Network
Lengths are set by contract, not by a universal rule. Experian reports a typical draw of five to 10 years, followed by a 20-year repayment, and notes that some lenders offer 15- or 20-year draws. Those are market-wide statistics.
Here is how our network compares:
| Occupancy | Draw | Repayment | Max CLTV |
|---|---|---|---|
| Investment property | 5 years | 25 years | 70% |
| Primary residence | 3 or 5 years | 17 or 25 years | Up to 90% at 720+ |
| Second home | 3 or 5 years | 17 or 25 years | Up to 90% at 720+ |
Investment lines run the 5-year draw and 25-year repayment structure only. A 70% CLTV is the ceiling there, with a 700 minimum credit profile. The 90% figure exists only on primary residences and second homes, and only at a 720 or better credit profile. It never applies to a rental.
Compared with the market norm, the investment structure is shorter on the draw and longer on the repayment. You get half the time to use the money, then a longer, gentler payoff. Is that better? It depends on your plan. An investor who will refinance within a few years may prefer it. One who wants a decade of cheap flexibility won’t find it here.
Why the Payment Jumps (and How to Size It)
The jump happens because the same balance now has a job to do. In the draw, a payment covers the cost of borrowing. In repayment, it must also retire the balance within the term.
Experian notes that many borrowers see payments more than double at the switch. The size of the jump depends on the term and on where the floating index sits that day. Nothing in the contract guarantees it will be small.
Picture an investor who drew the full line to buy a duplex and paid only interest for five years. On the first day of repayment, the balance hasn’t moved. The payment is now built to amortize all of it over 25 years. Because the term is long, the step-up on a network line is gentler than it would be on a short market term. Still, a new principal payment lands on a property that may already be thin.
That brings up the underwriting test. Lenders qualify these lines on you, not the property. Debt-to-income is capped at 50% (45% for credit profiles from 600 to 679) and is tested on the interest-only payment at the full line, not on what you plan to draw. So the lender stress-tests the line as if you’d borrowed all of it. You should stress-test it too, including the repayment payment.
Where the HELOC and DSCR Math Part Ways
DSCR qualifies a rental primarily on property-level rental income covering the payment, subject to lender guidelines. A HELOC works the other way. It looks at credit, deposits, and your overall debt load.
That split matters when you stack them. Say you use a line against your own home as the down payment on a rental, then finance the rental with a DSCR loan. The DSCR ratio only measures that rental’s rent against that loan’s payment. The HELOC payment is a second bill the ratio never counts.
So you can have a rental that clears 1.00 and still lose money each month. DSCR compares rent to PITIA (principal, interest, taxes, insurance, and any HOA dues) only. Repairs, vacancy, management, and utilities sit outside the calculation, and the HELOC payment does too. Clearing the ratio is not the same as positive cash flow.
If you’re new to the metric, Lendmire’s complete DSCR loans guide walks through the full ratio and how coverage affects leverage and pricing.
Where the General Rule Breaks
The two-phase picture covers most lines. These cases don’t follow it.
Balloon structures. Some agreements make the whole balance due when the draw ends, as Experian notes. They’re uncommon, but the agreement controls, so read it. A balloon turns a repayment cushion into a refinance deadline.
Conversion to fixed. Some lenders let you lock part or all of a balance in repayment. Network lines don’t. Pricing floats from first draw to final payment.
Vesting. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts can’t hold title on a network HELOC. Title must sit with you personally or in a revocable living trust. A property already deeded to an LLC needs a vesting change, or a DSCR cash-out instead, subject to program terms. This is the sharpest structural difference from a DSCR loan.
Use restrictions. The CFPB’s HELOC consumer booklet warns that renting your home to others may be prohibited under your line’s terms. It also says a sale generally requires paying the line off in full. Landlords should check both before drawing on a rental.
Portfolio caps. A borrower is limited to three lines, and an investor with more than 15 financed properties isn’t eligible.
Property types. Single-family, 2-4 units, PUD, townhome, and condo (including non-warrantable) are eligible. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural zoning are not.
What To Do Before the Draw Ends
The right move depends on your balance, your property, and your credit. Build the timeline backward from your end date, which is in your agreement.
- Twelve months out: Find the exact date. Ask the lender how the new payment will be calculated.
- Six months out: Price a payoff or refinance. A cash-out refinance on a rental typically tops out near 75% LTV, and about six months of seasoning is the common expectation, subject to lender guidelines.
- Ninety days out: Run your own cash flow with the new payment, plus vacancy and repairs.
- At the switch: Confirm the draw has closed and set up the payment.
| Option | Best fit | Watch for |
|---|---|---|
| Pay it off | Cash on hand or a sale | Any early-closure charge |
| Pay down early | Steady cash flow | Doesn’t change the term |
| Refinance out | Strong equity, solid coverage | Needs the refinance to actually happen |
| Ride it out | Wide cash-flow margin | Floating pricing in repayment |
The buy, refinance, and repay-the-line plan only works if the refinance clears. Leave a plan B. If the property can’t afford principal payments on its own, the refinance isn’t optional. For a closer look at the investment-line mechanics, see Lendmire’s piece Investment Property HELOC Draw Period and Repayment Structure.
What if you can’t make the payment? Call the lender before you miss one. Ask about hardship options. The home is collateral, so a default puts the property at risk. A conversation before the switch beats one after.
Across the files we see, the surprises usually trace to two things. Investors budget off the interest-only payment and never model the amortizing one. And they assume the repayment term is a refinance cushion, when it’s really a payoff schedule.
Common Myths About the Two Phases
The payment stays low. It doesn’t. Principal arrives when repayment starts.
It’s a fixed-rate loan. Most HELOCs float, and network lines always do.
Terms are the same everywhere. They aren’t. A 5-year draw and a 3-year draw are both real, and so is a 10-year one.
Interest-only is required. Principal payments are optional but allowed, which is the smart move if you can afford it.
An LLC can hold it. Not on these lines.
Frequently Asked Questions
What happens when the HELOC draw period ends?
Borrowing stops, and the balance is locked in. Your payment is then recalculated so the full balance amortizes over the repayment term, adding principal to what you pay. On investment lines in our network, that’s a 25-year schedule after a 5-year draw.
Can I extend a draw period?
Usually not by default. Extensions depend on your agreement and the lender. Many borrowers instead refinance or open a new line, which means a fresh review of credit, equity, and DTI. Plan on that rather than assuming a renewal.
Can I pay off a HELOC during the draw period?
Yes, in most agreements. Principal payments are allowed and generally restore available credit. Some lenders charge for closing a line early, so check your terms.
Does the repayment payment change with the market?
On network lines, yes. Pricing floats through both phases and never converts to fixed. Some lenders elsewhere offer conversion, so confirm in your own agreement.
Does a HELOC payment count in my DSCR?
No. DSCR measures rent against the payment on the loan on that rental. A HELOC payment is a separate obligation the ratio ignores, which is why your cash flow needs its own check. Tax treatment varies; consult a qualified professional.
Next Step
If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. HELOC programs here are available in 16 full-service states, narrower than the DSCR footprint, so availability depends on where the property sits.
The cleanest HELOC plans start with the end date, not the draw.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and real estate investors in its 16 full-service states open home equity lines of credit arranged through wholesale lenders. Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. NerdWallet: HELOC explainer
2. Experian: What is a draw period on a HELOC
3. CFPB: What You Should Know About Home Equity Lines of Credit
This article is part of Lendmire’s home equity line of credit program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Rental HELOC Calculator for a Portfolio Down Payment Strategy · Digital Rental HELOC vs Bank HELOC on a 2 to 4 Unit · Rental HELOC Fees When You Are Protecting a Low First Lien
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.