HELOC Repayment Period Rules for When the Draw Period Ends

The Quick Read: When a draw period ends, borrowing stops and the line moves into repayment, where the balance is paid down on a fixed schedule or, on some plans, comes due all at once. The payment is recalculated for the new phase, and it is usually much larger than the interest-only payment before it. Your signed agreement decides which version you have.

• The draw end date and the repayment length are set in your agreement, not by a general rule.
• Interest-only payments during the draw leave the principal untouched, so the full balance still has to be repaid.
• Some plans amortize the balance over a set term. Others end in a single balloon payment.
• Variable pricing can move your payment in repayment even though you can no longer draw.
• Rental investors usually plan the exit early, often with a DSCR cash-out refinance or a payoff from other capital.

What Actually Happens When the Draw Period Ends?

The line stops working like a credit card and starts working like a loan. During the draw, you can borrow up to your limit, repay, and borrow again. Interest accrues only on the drawn balance, and many plans ask for interest-only payments.

On the end date, that revolving feature switches off. Experian explains that the line closes to new borrowing at this point. It also notes that payments can more than double even when no balloon is involved. The reason is simple. The old payment covered only interest, and the new payment has to retire the principal as well.

Three things change at once:

1. Access. You cannot draw more money, even if you have paid the balance down.

2. Payment type. An interest-only payment becomes a principal-and-interest payment, or the whole balance comes due.

3. Pricing behavior. On a variable plan, the payment can still move up or down as the index moves.

Most borrowers feel the first change only when a draw is declined. The second change hits the budget.

Key Terms Defined

Draw period: The stretch when you can borrow from the line, usually paying interest only.

Repayment period: The stretch after the draw ends, when you cannot borrow and must pay the balance back.

Amortization: A schedule where each payment covers interest plus some principal, so the balance reaches zero at the end of the term.

Balloon payment: One large payment of the remaining balance, due at the end of the term instead of a gradual payoff.

CLTV (combined loan-to-value): All loans secured by the property, added together and divided by its value.

Payment shock: The sudden jump in your monthly bill when interest-only payments turn into amortizing ones.

Variable pricing: A cost that floats with an index plus a margin, so your payment can change over time.

Vesting: The way title to the property is held, such as in your own name, in a trust, or in an LLC.

Which Do You Have: A Repayment Schedule or a Balloon?

You have one or the other, and the agreement says which. The CFPB’s HELOC brochure makes the point plainly: whatever you paid during the draw, a repayment period begins when it ends. The lender may set a schedule to repay the full amount, or it may require the entire balance at once as a balloon.

A balloon is the risky version. The same brochure warns that you must be ready to meet it by refinancing with the same lender, getting a loan elsewhere, or finding other money. If you cannot, you could lose the property. A refinance is only one way out, and it is never guaranteed. Your credit, the property’s value, and market pricing may all look different by then.

To check your own plan, read the agreement for these items:

• The draw end date and the length of the repayment term.
• Whether the end state is a schedule that amortizes or a single payment of the full balance.
• The index, the margin, and any caps on how far pricing can move.
• Renewal, early payoff, and early termination terms.

If you find a single large payment at the end of the term, treat it as a balloon, whatever the document calls it.

How the Repayment Payment Gets Set

The lender takes your remaining balance, the current pricing, and the repayment term. It then solves for the payment that brings the balance to zero by the last month. A longer term means a smaller payment but more total interest. A shorter term does the opposite.

Ask CFPB gives a 10-year draw followed by a 10- or 20-year repayment as common examples. Experian puts typical repayment at about 20 years. Those are market-wide examples, not network figures. On the investment lines Lendmire places through its wholesale network, the structure is a 5-year interest-only draw followed by a 25-year fully amortizing repayment.

Run the numbers on a modeled assumption, not a market fact. Say a rental covers its full monthly obligation at about 1.40x while the line is interest-only. If the recalculated payment lands around 40% higher, coverage drops to roughly 1.0x. Nothing about the rent changed. Only the structure did.

Variable pricing adds a second moving part. The CFPB brochure notes that payments can change on a variable plan even if you draw nothing more. A stable payment in repayment is possible, but it is not something to assume.

Interest-only also does not mean the debt is shrinking. Unless you voluntarily paid principal, the balance on the last day of the draw equals the balance you carried through it.

How the Network’s Lines Are Built

Across the wholesale network Lendmire works with, the home equity lines are standalone lines in first or second lien position, and they never convert to a fixed price. Pricing floats through both the draw and the repayment period. At least 75% of the line is drawn at closing, so most of the balance is outstanding and will amortize from the start.

Structure depends on occupancy:

The 3-year draw pairs with a 17-year fully amortizing repayment, and the 5-year draw pairs with 25 years. Tennessee shortens both structures, to 3 years with 12 and 5 years with 10. These lines are offered in 16 states, which is narrower than the 41-market DSCR footprint.

For investors, the investment row is the one that matters. It carries a 700 minimum credit score, a 70% CLTV ceiling, and a $500,000 cap on the line. There is no higher tier above those numbers. Qualification is based on a 50% maximum debt-to-income ratio (45% for credit profiles from 600 to 679), using the interest-only payment on the maximum draw. That detail is easy to miss. The file is tested on the interest-only payment, so the step-up in repayment is not part of the approval math. It becomes your problem to plan for.

Title is the sharpest structural limit. Title must be held by an individual or a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title on these lines. A rental already deeded to an LLC needs a vesting change first, or a DSCR cash-out refinance instead, subject to lender program eligibility on the entity-titled loan. A borrower is also limited to three lines and cannot own more than 15 financed properties. The lines are subject to lender guidelines and full file review. This is not a commitment to lend.

Where the General Rule Breaks

The pattern is a draw, then a payment step-up, then a payoff. A few situations bend it.

Renewal is an option, not a right. The CFPB’s older HELOC booklet notes that some plans allow renewal at the end of the draw, and some do not. If your plan has no renewal, you cannot borrow more after the period ends. Do not build an investment plan around a renewal the lender never promised.

Balloon plans change the math. An interest-only draw with no repayment period leaves one lump sum due. The risk is refinance risk, as covered above. The lines in Lendmire’s network instead move into a fully amortizing repayment.

The lender can call the balance for a breach. A missed obligation under the agreement can allow the lender to demand payment. That is a separate event from the scheduled end of the draw, and it follows different terms.

Property type can block the exit. Manufactured homes, co-ops, condotels, log homes, commercial and mixed-use properties, and agricultural zoning are not eligible for these lines. Manufactured homes, log homes, and barndominiums are also not offered under the network’s DSCR programs, so they have no refinance exit there either.

Scale changes the tool. A line capped at $500,000 on an investment property is small next to a growing portfolio. A DSCR loan reviews the property’s qualifying rent coverage, while a HELOC is reviewed on credit, income, and debt-to-income. The two products answer different questions.

What Does a Rental Investor Do Before the Draw Ends?

Start about a year out, and pick an exit before you pick a payment plan. This is the part most explainers skip. A HELOC on a rental is usually temporary capital, and the draw end date is the deadline for a decision you should already have made.

A simple countdown works:

• 12 months out: Find the draw end date and the repayment terms in the agreement. Rerun your rental’s cash flow at the amortized payment.
• 6 months out: Pick the exit. Check your credit, your remaining equity, and the property’s occupancy and lease status.
• 3 months out: Start the application for the exit loan, if you are refinancing. Line up cash if you are paying down.
• At conversion: Confirm the new payment and set up autopay so the first amortized bill is not a surprise.

The main exits compare like this:

The DSCR cash-out route deserves a closer look, because it solves the vesting problem and the size problem at once. Across the network, cash-out refinances top out around 75% LTV on standard rentals, with 70% for short-term-rental collateral. About 6 months of seasoning is the common expectation. A 1.00 coverage ratio is where select programs start, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Most programs want credit around 660, and 700 or better opens the strongest leverage tiers. Reserves vary by lender, leverage, and loan size, and are commonly around 6 months of PITIA. PITIA is principal, interest, taxes, insurance, and association dues. The complete DSCR loans guide walks through how these tests fit together.

One caution travels with this route. Clearing 1.00 does not mean positive cash flow. The ratio compares rent to PITIA only, and repairs, vacancy, management, utilities, and capital expenses sit outside it.

Our guide to investment property HELOC draw period and repayment structure covers how the draw phase and the repayment phase differ. Tax treatment varies, so keep clear records and consult a qualified tax professional before relying on any deduction.

Brokers see one pattern often. Investors model the interest-only payment, never model the amortized one, and meet the step-up with a refinance that has to happen on the lender’s calendar. The files that go smoothly were stress-tested before the draw ended.

What If You Can’t Afford the New Payment?

Contact the servicer before the first missed payment. Hardship options vary by servicer and by agreement, and nothing in them is automatic. Ask what a modified term, a payoff plan, or a refinance would require, and ask in writing.

Meanwhile, look at your own levers. Pay principal during the draw if you can, because every dollar paid lowers the balance that has to amortize. Raise rents where the market and lease terms allow it. Consider selling a weaker property to retire the line.

The risk is real. As the CFPB brochure says, if you cannot meet the obligation, you could lose the property. An early conversation with the servicer is cheaper than a late one.

Comparing Your Options

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. Reach out at 828-256-2183 or request a quote.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and real estate investors in its 16 full-service states. Home equity lines of credit are arranged through wholesale lending channels; Lendmire brokers the line and the lender underwrites each application under its occupancy-based guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Experian: How does HELOC repayment work?

2. CFPB HELOC brochure

3. CFPB: What is a home equity line of credit (HELOC)?