How an Investment Property HELOC Works After the Draw Period Ends

The Quick Read: When the draw period ends, borrowing stops and the line switches to repayment. Each payment then includes principal as well as interest, and the balance is paid off over a fixed term. On the investment lines Lendmire places through its wholesale network, that means a five-year interest-only draw followed by a 25-year fully amortizing repayment.

• Draws stop on the date written in your note. The line does not keep revolving.
• The payment is recalculated to include principal, so it usually steps up.
• On the lines Lendmire arranges, the rate keeps floating through repayment. It never converts to fixed.
• Your exits are paying down, refinancing, selling, or living with the new payment. A DSCR cash-out refinance is the usual refinance route for a rental.

What Changes on the Last Day of the Draw?

On the last day of the draw, three things change at once. You lose the ability to borrow. Your payment stops being interest-only. The balance starts shrinking on a schedule. The line itself is the same contract. It just runs on different rules.

Market lines often run a 10-year draw followed by a 20-year repayment, per BiggerPockets. Experian puts the typical draw at five to 10 years. Those are market-wide patterns. The network lines Lendmire places for investment properties run a five-year draw and a 25-year repayment, with no balloon at the end.

Your note fixes the exact date. Find it before you do anything else.

How Does the New Payment Get Calculated?

The lender locks your balance as of the conversion date. That balance is spread over the repayment term. Three inputs set the new payment: the balance, the length of the term, and the rate. The balance is the one you control.

Here is the catch for investors. On the investment lines Lendmire places, at least 75% of the line must be drawn at closing. So the balance entering repayment is often large from day one. It is not something that builds slowly.

Paying principal during the draw helps. Experian notes that a lower balance at conversion means less to amortize later. Every dollar you pay down while the payment is interest-only shrinks the payment that follows.

The repayment term works the other way. A longer term spreads the balance out and softens the step-up. A shorter term raises it. That is why you read the note rather than assuming the typical numbers apply to you.

Can the Rental Carry the New Payment?

Often yes, but you have to test it before the conversion date, not after. The test is the same coverage idea lenders use on DSCR loans: monthly rent divided by the full monthly obligation. A line sized on interest-only payments can look comfortable and then tighten sharply once principal is added.

Run it as a modeled illustration, not market data. Say a rental clears roughly 1.4x on the interest-only draw payment. Add principal over the repayment term, and that same rental might land near 1.1x. With a large balance, it can slip under 1.00x. The rent did not change. The payment did.

Keep one distinction straight. Clearing 1.00x does not mean positive cash flow. The ratio compares rent to the payment only. Repairs, vacancy, management, utilities, and capital expenses sit outside it. A property that covers its payment on paper can still lose money in a month with a vacancy and a new roof.

Vacancy matters most in repayment. The payment is owed whether the unit is occupied or not. Stress-test your numbers with a few empty months before the step-up lands, not after.

At origination, lenders on investment lines typically look at your debt-to-income picture, with a 50% maximum, and qualify you on the interest-only payment calculated on the maximum draw. That is a test of the draw-period payment. It does not test the repayment payment. Nobody does that math for you later.

Does the Rate Keep Moving?

Yes. Per the CFPB’s HELOC explainer, HELOCs usually carry a variable rate, so payments can change month to month. On the lines Lendmire arranges, pricing floats through both the draw and the repayment period. It does not lock when repayment starts.

That makes the repayment payment a moving target. The step-up from principal can stack on top of any movement in the rate. Investors who plan a long hold on a line like this need cushion in the coverage number, not just a pass at the starting point.

Practitioners often treat a floating line as a bridge, not a permanent loan. That is the right mental model. The line gets you into or through a project. A fixed-payment loan takes over after.

Where the General Rule Breaks

Most of the surprises on a HELOC come from the contract, not the product label. These are the edge cases that catch investors off guard.

Balloon versus amortizing. This is the biggest fork. Some HELOCs end with a lump sum due at once instead of a repayment schedule. BiggerPockets notes that some lines require a balloon at the end of the draw and do not convert automatically to repayment. A borrower facing one may be able to refinance into a fixed-rate loan. The lines Lendmire places amortize over 25 years, but other lines in the market may not.

Renewal is a contract term, not a right. The CFPB’s HELOC booklet says some plans can be renewed and others cannot. If yours cannot, you lose the ability to borrow when the window closes. Plan as though the draw ends and treat any renewal as a bonus.

A freeze can come early. If the property’s value falls significantly, the lender may decline further draws, even before the draw period ends. The CFPB explainer says so directly. Lendmire’s piece How Much a Value Drop Cuts a HELOC After the Draw Period Ends walks through that mechanic.

Which property secures the line. A line on your home puts your home at risk. A line on the rental puts the rental at risk. The same CFPB explainer warns that falling behind could mean losing the home. Know which one you pledged.

Rental-use restrictions. The booklet also warns that some plans prohibit renting out the home. A line meant to fund or sit on a rental has to be written for that use.

Title and ownership. On the investment lines in the network, the borrower must hold title as an individual or in a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. A property already deeded to an LLC needs a vesting change or a different structure, such as a DSCR cash-out. This is the sharpest structural difference from a DSCR loan.

Property types and size. On an investment property, the line tops out at $500,000 and 70% CLTV (combined loan-to-value, counting the first mortgage plus the line). That requires a 700 or better credit profile. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties are not eligible.

Here is a practitioner note. On files that cross my desk, the sizing mistake is rarely the line itself. It is the investor who sized the whole deal on the draw-period payment and never ran the repayment payment. The deal worked at draw. It stops working at conversion. Run both before you sign.

What Are Your Exit Options?

You have five real choices when the draw ends. Which one fits depends on the rent, the equity, and how long you plan to hold.

The refinance route deserves a closer look. A DSCR cash-out refinance is a new first-lien loan, not a revolving line. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, not on your personal income. It has a fixed schedule instead of a floating one, which is the opposite of the repayment step-up problem.

In the network, cash-out on a standard rental tops out around 75% LTV, and about six months of seasoning is the common expectation. The new loan must pay off both your first mortgage and the HELOC. So the combined balance has to fit under that leverage cap. Lendmire’s complete DSCR loans guide covers the full set of program mechanics. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.

On coverage, 1.00x is where select programs start. A separate select-lender path takes coverage below 1.00x, with leverage and terms adjusted. Stronger coverage opens better pricing and leverage. Most programs want a credit score around 660, a 620 floor exists in parts of the network, and 700 or better unlocks the strongest tiers. Reserves commonly run about six months of PITIA (principal, interest, taxes, insurance, and HOA dues), though they vary by lender, leverage, and loan size. Loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders).

There is a trade-off worth weighing. If your first mortgage is a good one, a refinance replaces it too. That is a real cost. The stronger play depends on how much of your debt is the HELOC and how much is the first mortgage. For a small line on a large first lien, paying the line down may beat refinancing everything. For a large line on a modest first lien, a cash-out can clean it up.

DSCR loans for rentals held in an LLC are available subject to lender program eligibility. That is the opposite of the HELOC, which cannot be held that way. If your rental is in an LLC, the refinance may be your cleanest path.

A Timeline for the Final 12 Months

Working backward from the conversion date beats reacting to it. Here is a sequence that works.

12 months out. Find the conversion date in your note. Read the repayment term, the balloon clause, and the renewal clause. Pull your current balance and rent roll.

9 months out. Model the repayment payment. Run coverage with a few months of vacancy. Decide whether the rental carries it.

6 months out. Decide your exit. If you plan to refinance, check seasoning and equity now. A DSCR cash-out wants roughly six months of ownership, so the clock matters. Start talking to a broker while you still have options.

3 months out. Get insurance and rent documentation in order. Collect leases. Pay down principal if you have the cash and a refinance is not coming.

Conversion date. Confirm the new payment matches your math. Set up autopay. Do not assume a notice will arrive.

Mistakes to Avoid

• Sizing on the draw payment. The interest-only payment is a temporary number. Budget on the repayment payment.
• Assuming the draw renews. Treat renewal as a bonus, not a plan.
• Ignoring the floating rate. A step-up plus a rate move can compound.
• Waiting until the last month. A refinance needs lead time for seasoning, appraisal or valuation, and documents.
• Confusing coverage with cash flow. Clearing 1.00x says nothing about repairs or vacancy.
• Forgetting the title issue. If the rental sits in an LLC, a HELOC and a DSCR loan do not work the same way.

Key Terms Defined

Draw period: the window when you can borrow, repay, and borrow again up to your limit.

Repayment period: the stretch after the draw ends, when you can no longer borrow and the balance gets paid off.

Amortization: paying a balance down on a schedule so principal falls with each payment.

Balloon payment: a lump sum due at the end of a loan instead of a gradual payoff.

CLTV: combined loan-to-value, the total of all loans on the property divided by its value.

DSCR: debt service coverage ratio, a measure of whether monthly rent covers the full monthly property payment.

PITIA: principal, interest, taxes, insurance, and association dues, the full monthly obligation on a property.

Seasoning: the waiting period a lender wants between buying a property and refinancing it.

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. Reach the team at 828-256-2183. A DSCR cash-out refinance is subject to lender guidelines and is not a commitment to lend.

Most investors who get hurt by a draw ending were not surprised by the rule. They were surprised by the date.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage broker. Home equity lines of credit — on a primary residence, a second home or an investment property — are arranged through wholesale lenders in Lendmire’s 16 full-service states, and every line is underwritten by the lender under its program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. BiggerPockets – HELOC glossary

2. Experian – How Does HELOC Repayment Work

3. CFPB’s HELOC explainer

4. BiggerPockets – What Is a HELOC

5. CFPB – What You Should Know About HELOCs