Bank Statement HELOC Draw Period and Repayment Term Lengths

The Quick Read: A bank statement HELOC runs in two phases: a draw period when you borrow and pay interest only, then a repayment period when the balance amortizes, and on Lendmire’s network an investment property line uses a 5-year draw followed by a 25-year repayment, while primary and second homes can also choose 3 years and 17 years. The lengths are fixed at closing by the program and your occupancy type. You do not pick them freely.

• Investment lines use one structure: a 5-year interest-only draw and a 25-year repayment, a 30-year life in total.
• Primary and second homes can choose 3/17 or 5/25, so the draw is shorter or longer by choice.
• At least 75% of the line is drawn at closing, so interest-only payments run on most of the line from the start.
• Pricing floats through both phases and never converts to fixed.
• The payment steps up when repayment begins, and the size of the jump depends on the balance you carry.

Everything below describes select lenders in Lendmire’s wholesale network, subject to lender guidelines and full file review. Lendmire is a broker, not the lender. These lines are available only in Lendmire’s 16 full-service states, which is narrower than its 41-market DSCR footprint. Programs change, and every file is underwritten individually.

Key Terms Defined

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

Repayment period: the phase after the draw ends, when borrowing stops and the balance is paid down on a schedule.

Interest-only: a payment that covers the cost of borrowing on the drawn balance and none of the principal.

Fully amortizing: a payment sized to bring the balance to zero by the end of the term.

CLTV: combined loan-to-value, which adds every lien on the property and divides by its value.

Floating pricing: pricing that keeps moving over the life of the line instead of locking in.

Bank statement income: qualifying income measured from documented business or personal deposits, commonly over 12 or 24 months, instead of tax returns.

How Do the Five Phases Work, Step by Step?

The draw runs first, then repayment. The program sets the lengths at closing, and the balance on the last day of the draw becomes the amount you repay.

1. Qualification. The borrower is reviewed on documented bank deposits under the applicable program. Transfers and one-off deposits that are not income get screened out. Debt-to-income is capped at 50%, and 45% for credit profiles from 600 to 679. The payment used for qualifying is interest-only on the maximum draw, not on what you plan to use.

2. Structure assignment. Occupancy and credit decide which draw and repayment pair applies.

3. Draw phase. You borrow, repay and borrow again within the limit. Payments are interest-only on the drawn balance.

4. Draw end. Borrowing stops. Whatever you owe becomes the repayment balance.

5. Repayment phase. The payment is reset so the balance fully amortizes over the repayment term. Principal enters the payment, so it rises, and floating pricing keeps it moving.

Most market education describes the same shape. NerdWallet’s HELOC explainer says the draw usually allows interest-only payments and warns that repayment can be a rude awakening for borrowers who paid only the minimum.

What Lengths Do These Lines Actually Run?

Lengths depend on occupancy. An investment property gets the 5/25 structure only. A primary residence or second home can choose between 3/17 and 5/25.

Tennessee shortens both structures on primary and second homes, to 3 years with 12 years of repayment and 5 years with 10 years of repayment.

Market-wide education runs a bit differently. Experian reports that draws typically run 5 to 10 years with a 20-year repayment, and that lengths vary by lender. That 10-plus-20 pattern is a market-wide description, not a rule. On Lendmire’s network, an investment line has a 5-year draw and a 25-year repayment.

Investment lines carry their own limits. The ceiling is 70% CLTV on an investment property, the maximum line is $500,000, and the minimum credit profile is 700. Primary-residence and second-home lines reach higher, up to 90% CLTV, but that top tier exists only at a 720-or-better credit profile. Each ceiling applies within its own occupancy type.

Why Doesn’t a Longer Draw Mean a Longer Life?

A longer draw does not add years to the loan. Splitting 30 years as a 5-year draw and a 25-year repayment, or as any other mix, changes only how the time is divided, not how long it lasts. On this network, the 5/25 line lasts 30 years and the 3/17 line lasts 20.

The 5/25 line gives you a longer borrowing window and a longer payoff. Each dollar you owe costs less per month at repayment, because it is spread over 25 years. The 3/17 line gives a shorter borrowing window and a shorter payoff, so each dollar owed costs more per month at repayment. This is simple arithmetic, not a market statistic.

The practical lesson is that the window to borrow and the burden of repaying pull in opposite directions. A primary-residence borrower weighing 3/17 against 5/25 is really choosing between a heavier monthly cost per dollar owed and a longer stretch of interest-only borrowing.

Where the General Rule Breaks

Several edge cases change how this works in practice.

The heavy up-front draw. At least 75% of the line is drawn at closing. Interest-only payments therefore run on most of the line from the first month. You cannot leave the line mostly undrawn as a standby reserve.

Later draws have a floor. After closing, the minimum subsequent draw is $1,000, and Texas sets it at $4,000. This minimum is stated for the 5/25 structure; the 3/17 structure does not state one. Small top-ups are not an option.

Pricing never converts. Some market products let you convert to a fixed rate at repayment. NerdWallet mentions refinancing to a fixed loan as a market-dependent option. On these lines, pricing floats across both phases and never converts to fixed. Any move to fixed pricing means a refinance.

Balloon structures exist elsewhere. Experian notes that some HELOCs carry a balloon payment when the draw ends. Lendmire’s investment structure is fully amortizing at repayment, but any line you compare should have its contract checked for a balloon.

Lump-sum seconds sold as lines. Some products labeled HELOCs are lump-sum second mortgages with no revolving feature. Confirm the product type before comparing lengths.

Title and vesting. The borrower must hold title individually or in a revocable living trust. LLCs, corporations, partnerships and irrevocable, blind or land trusts cannot hold title. This is the sharpest structural difference from a DSCR loan, which can be made to LLC-titled entities, subject to lender program eligibility. A property already deeded to an LLC needs a vesting change or a DSCR cash-out instead.

Property and exposure limits. Single-family, 2-4 unit, PUD, townhome and condominium properties are eligible, including non-warrantable condos. Manufactured homes, co-ops, condotels, log homes, commercial and mixed-use properties are not offered. A borrower is limited to three lines, and a borrower with more than 15 financed properties is not eligible.

What Does the Step-Up Do to Rental Cash Flow?

The step-up is the biggest cash-flow event in the life of the line. The CFPB’s Ask CFPB page on HELOCs says repayment schedules are often set over ten or 20 years and that payments are often significantly higher once repayment begins. It also confirms the line is open-end, so borrowing stops when the draw ends.

Three variables set the size of the jump:

• The balance on the last day of the draw.
• Any principal paid during the draw.
• The length of the repayment term.

Floating pricing adds a fourth. The CFPB’s HELOC brochure notes that with a variable rate, payments can change even if you draw nothing more. Interest-only payments during the draw also build no equity through paydown.

For a rental, the payment should be tested against rent that already allows for vacancy, repairs and management. DSCR math does not do that for you. A DSCR ratio compares rent only to the full monthly housing obligation (principal, interest, taxes, insurance and any HOA dues). Clearing 1.00 does not mean positive cash flow, because repairs, vacancy, management and capital costs sit outside it. Run the repayment step-up through your own operating budget before you draw.

How to Choose a Structure

The right pairing depends on what the money does and when it comes back.

Choose the longer draw (5/25) if the line funds a down payment or renovation that will take a few years to stabilize and refinance. The longer runway for interest-only borrowing and the lower step-up per dollar owed both help.

Consider the shorter draw (3/17) if you are on a primary residence or second home, plan to pay the line down quickly in dollar terms, and prefer a shorter total life. Investment properties do not have this option.

Plan the exit before you draw. The draw end date is fixed. Your options at that point are paying principal during the draw, refinancing into a DSCR cash-out or other loan, or selling the property. You must generally pay off a HELOC in full on a sale. The CFPB’s print brochure says so directly.

A DSCR cash-out refinance works differently. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, and it replaces the existing first mortgage instead of sitting behind it. On standard rentals, cash-out tops out around 75% LTV across most of the network, and short-term-rental collateral is lower at 70%. A line leaves the first mortgage in place. A cash-out replaces it.

For related program detail, Lendmire’s piece Top Bank Statement HELOC Providers With the Longest Possible Draw Period covers the runway side. The complete DSCR loans guide explains the cash-out alternative in full.

If You Are Considering a Home Equity Line

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 Lendmire at 828-256-2183, or use the quote request page. The calculator on the site gives an illustrative estimate only, and it is not a quote or a commitment to lend.

For current guidelines and terms, see Lendmire’s bank statement HELOC programs page.

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. NerdWallet HELOC explainer and calculator

2. Experian: What Is a Draw Period on a HELOC

3. CFPB Ask CFPB: What is a HELOC

4. CFPB HELOC brochure (PDF)