HELOC Draw Period and Repayment Requirements for Homeowners

The Quick Read: A home equity line of credit has two phases. During the draw period you borrow, repay and borrow again up to a limit, and the required payment is often interest-only. When the draw ends, borrowing stops and the repayment period begins, which means principal plus interest or, on some plans, a lump sum due.

• The draw period usually runs five to ten years, and the contract sets the exact length.
• The payment typically steps up when repayment starts, sometimes by a lot.
• A variable rate can change the payment even if you never draw again.
• On the wholesale programs Lendmire brokers, investment-property lines cap at 70% CLTV, and the maximum line is $500,000.
• A HELOC payment on your own home sits outside the DSCR ratio, but it still lands on your real cash flow.

Investors tend to ask about this product for one reason: pulling equity from a home they already own to fund the next rental. The draw and repayment mechanics decide whether that works or becomes a problem at a fixed future date. Lendmire is a broker, so it arranges these lines through select wholesale partners and does not lend directly.

How a HELOC Works in Two Phases

A HELOC is an open-end line of credit secured by your home. The CFPB’s overview of home equity lines says you can generally borrow up to your limit at any time during the draw period, usually by special check or card, with minimum payments based on your current balance.

Interest accrues only on what you’ve actually borrowed, not on the full limit. A $200,000 line with a small balance costs interest on the small balance.

Then the clock runs out. Borrowing ends, unused credit disappears, and the line converts to repayment. Think of it as a timeline with a hard edge in the middle.

What Do You Have to Pay During the Draw Period?

It depends on the plan, and this is where borrowers get surprised. The CFPB’s HELOC booklet describes two structures:

• Principal-bearing minimums. The minimum includes interest plus a slice of principal. That slice typically doesn’t repay the balance by the end of the term.
• Interest-only minimums. You pay accrued interest and nothing toward principal.

On the investment lines in Lendmire’s wholesale network, the draw phase is interest-only. At least 75% of the line is drawn at closing, so you start with a substantial balance, not an empty limit. Subsequent draws after closing carry a $1,000 minimum on the longer-runway structure described below.

Interest-only flatters your monthly picture. It does not shrink the debt. Any principal you pay voluntarily during the draw lowers what has to be repaid later, and that is the cleanest way to soften the step-up.

What Happens When the Draw Period Ends?

The balance moves into a repayment period, and the payment typically rises because you now owe principal and interest. Experian’s explainer on draw periods notes that many borrowers find payments more than double compared with interest-only payments. That is a general observation, not a fixed ratio.

Repayment structures vary in three main ways:

1. Amortizing schedule. The full balance is paid down over a set term. The CFPB booklet says this is often ten or 15 years, while Experian cites a 20-year repayment period after a five-to-ten-year draw. Both are typical ranges. Your contract controls.

2. Balloon payment. Some plans demand the whole balance at once when the draw ends.

3. Renewal or extension. Some lenders will renew or extend the draw at their option. That is one lender’s contract language, not a right you can count on.

If the rate is variable, the payment can change even when you stop borrowing. The same booklet says so directly.

Draw vs. Repayment Side by Side

The Structures Lendmire’s Network Offers

Program details change, and every file is underwritten individually. As a broker with a view across several wholesale lenders, Lendmire sees two distinct draw structures on primary residences and second homes:

• A 3-year interest-only draw followed by a 17-year fully amortizing repayment.
• A 5-year interest-only draw followed by a 25-year fully amortizing repayment, the longer-runway structure.

Tennessee shortens both, to 3 and 12 years and to 5 and 10 years. Investment lines run the 5-year draw and 25-year repayment structure only. On all of these, pricing floats through both the draw and the repayment period and never converts to fixed. That matters if you were hoping to lock the payment once repayment starts.

Leverage depends on occupancy, and the tiers are not interchangeable:

Lines above $500,000 are primary-residence only, require a 700 score or better (720 on the longer-runway structure), cap at 75% CLTV, and require a full appraisal. Lines at or below $500,000 ordinarily use an automated valuation. A borrower can request a full appraisal in any case. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.

Some market surveys report investment-property HELOC limits as high as 80% LTV, with many lenders lower. That describes the broader market. The network figure for an investment property is 70% CLTV.

Where the General Rule Breaks

Vesting. These lines require title in an individual’s name or an inter vivos revocable living trust. LLCs, corporations, partnerships and irrevocable, blind or land trusts cannot hold title. If your rental is already deeded to an LLC, you would need a vesting change, or a DSCR cash-out refinance may fit better.

Property type. Single-family, 2-4 units, PUDs, townhomes and condos, including non-warrantable condos, are eligible. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use and agricultural-zoned properties are not.

Exposure. A borrower is limited to three lines, and one owning more than 15 financed properties is ineligible.

Qualification. HELOCs underwrite on debt-to-income, with a 50% maximum, or 45% for scores from 600 to 679. The payment is calculated on the interest-only payment at the maximum draw, so the file is tested on the cheap phase.

Sale of the home. The line is generally payable in full if you sell. Don’t treat it as portable debt.

Availability. These lines are offered in Lendmire’s 16 full-service states only, narrower than the 41-market DSCR footprint.

What This Means for an Investor

Start with the part that confuses people. DSCR compares rent to PITIA on the investment property only. A HELOC payment on your own home is generally excluded from that ratio, though a DTI-based loan would count it. Clearing 1.00 is also not the same as positive cash flow. Repairs, vacancy, management and utilities sit outside the calculation, and a line payment drawn from the same rent comes out of real margin.

Next, the step-up. An interest-only phase flatters cash flow for years. Before drawing, stress-test the rental at the repayment payment, and again under a higher variable rate. If the property only works at the interest-only payment, you are borrowing against the draw period, not the deal.

(That is a harder question than it sounds, because the repayment payment depends on the balance at the end, not the balance today.)

Third, the paper trail. A draw lands in bank statements and shows up in source-of-funds review. Whether a purchase lender accepts borrowed down-payment funds varies by program, so ask before you rely on it.

Fourth, a maturity plan. Whatever your plan’s structure, repayment arrives on a fixed date. Typical exits are paying down from sale proceeds, refinancing, or a cash-out refinance on a rental, which on most standard rentals tops out around 75% LTV with about six months of seasoning as the common expectation. DSCR programs generally start at a 1.00 floor on select programs, with stronger ratios opening better leverage, and a separate select-lender path exists below 1.00 with leverage and terms adjusted. Lendmire’s complete DSCR loans guide covers how those programs fit together.

A HELOC and a DSCR loan solve different problems. The line is cheap, flexible short-term capital secured by a home you own. A DSCR loan is long-term financing secured by the rental and qualified on its rent. Plenty of investors use the first to buy and the second to take the first out.

A Short Countdown for the End of Draw

• Twelve months out. Find the draw end date, repayment term, and any balloon or renewal language in your agreement.
• Six months out. Estimate the repayment payment from your balance, and decide whether to pay down principal, refinance or sell.
• Three months out. If refinancing, gather documents and confirm your credit and equity still support it. Lenders can freeze or reduce a line if home value or credit changes mid-draw, so don’t assume the limit stays put.

Lendmire’s piece HELOC Repayment Period Payment Changes for an Ended Draw Period goes deeper on this stage.

Key Terms Defined

Draw period: The window when you can borrow against the line.

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

Interest-only payment: A payment that covers accrued interest and nothing toward principal.

Amortization: Paying a balance down in scheduled installments that cover principal and interest.

Balloon payment: A large lump sum due when the draw or term ends.

CLTV: Combined loan-to-value, which adds the line to any other liens against the home.

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. Tax treatment varies; consult a qualified professional.

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. CFPB’s overview of home equity lines

2. CFPB – What You Should Know About HELOCs booklet

3. Experian’s explainer on draw periods