How a HELOC Works for Homeowners Who Need to Know When Repayment Starts

The Quick Read: Repayment starts on the draw-end date written in your note, not on the day the line closes, and until then you usually owe only interest on what you have drawn, after which borrowing stops and every payment includes principal as well. On the lines Lendmire arranges through its wholesale network, that draw window is three or five years on a primary home or second home, and five years on an investment property. Terms are subject to lender guidelines and full file review.

• The draw-end date is a contract date. Rent, credit and property value do not move it.
• During the draw you typically pay interest only, so the balance does not shrink.
• At the switch, the payment can jump sharply because principal joins the bill.
• On a network line for an investment property, the combined loan-to-value ceiling is 70%, and the line tops out at $500,000.
• Rental investors with larger needs or LLC-held properties often use a DSCR cash-out refinance instead.

When Does HELOC Repayment Start?

A HELOC has two phases, and the calendar between them is set in your contract. The first is the draw period, when you can borrow, repay and borrow again. The second is the repayment period, when the line is closed and you pay the balance down to zero.

Lenders and contracts differ on length. Experian says a draw period typically lasts five to 10 years and is followed by a 20-year repayment period. NerdWallet describes a similar pattern, with a draw of typically 10 years on interest-only minimum payments and repayment of often up to 20 years. Those are market-wide patterns. Your own note controls.

Look for the date in three places: the line agreement, the note, and the disclosure packet you received at application. They should state the draw length, the repayment length, how payments are calculated, whether a balloon is possible, and any fee for closing the line early. If you cannot find the date, ask your servicer for it in writing. Do not assume a reminder will arrive on time.

Hitting your credit limit does not usually start repayment. The draw-end date does. A maxed-out line simply means you cannot borrow more until you pay some back.

What Your Payment Does at the Switch

The payment changes because the job of the payment changes. During the draw, the bill covers the interest that has built up on your balance. Interest-only payments do not pay down the loan, so the balance on the last day of the draw equals the balance you carried through it.

Once repayment begins, the payment has to retire the whole balance by the end of the term. That means principal plus interest. The shorter the repayment term, the bigger the monthly payment, because the same balance is spread over fewer months. Regulators call the step-up “payment shock,” and the name is fair.

Here is a modeled picture, not a quote. Say a rental covers its first mortgage plus the interest-only carry on the line at roughly 1.25x. When principal joins the line’s payment, the combined obligation grows, and the same rent might cover it at barely 1.0x or below. The rent did not change. The payment did.

Two other things move the number. Pricing on most HELOCs floats with an index, so the payment can change even inside the repayment phase. And some lines end in a balloon, which means the whole balance comes due at once instead of amortizing. More on that below.

The Mechanics, Start to Finish

Here is the full life of a line, in order.

1. Application. The lender sizes the line from the property’s value and what is already owed against it. In simple terms, it takes a percentage of value and subtracts existing liens.

2. Second-mortgage position. The Consumer Financial Protection Bureau describes a HELOC as an open-end line of credit you can borrow against repeatedly. If you already have a first mortgage, the line is usually a second one, paid in addition to it. On the network Lendmire works with, a line can sit in first or second lien position.

3. Draw period. You borrow up to the limit, make payments, and see the available credit replenish as you pay. Some plans set minimum amounts per draw or an initial draw at setup.

4. Draw-end date. The line closes to new borrowing. Nothing about your rent, credit or value triggers this. The calendar does.

5. Repayment period. The payment is recalculated from the balance, the pricing, and the length of the repayment term. You pay it until the balance is gone.

The practical lesson is simple. Know the date on day one, and plan for the payment that follows it, not the one you pay during the draw.

Draw and Repayment Structures on a Network Line

Lendmire is a broker, not a lender. It places HELOC files with select wholesale partners, and those partners offer two draw structures on primary residences and second homes. Call them the three-year structure and the five-year structure.

A few states shorten the windows. Tennessee, for example, runs 3 years/12 years and 5 years/10 years. On both structures, pricing floats through the draw and the repayment period and never converts to fixed. At least 75% of the line is drawn at closing. That detail matters, because it means interest starts accruing on most of the line from the first day.

For after-closing borrowing, the five-year structure states a $1,000 minimum subsequent draw, with a higher minimum in Texas.

What the Network Allows by Occupancy

Maximum leverage depends on how you use the property. The figures below are combined loan-to-value (CLTV), meaning your first mortgage plus the line, divided by the property’s value. They are typical guideline ceilings, subject to lender guidelines and full file review.

The 90% ceiling exists only at a 720-or-better credit profile, and lower scores step down to lower ceilings. An investment line never goes above 70% CLTV.

Several other rules shape who gets a line:

• Debt-to-income: 50% maximum, and 45% for credit profiles from 600 to 679. Qualification runs on the interest-only payment calculated on the maximum draw, so the line is underwritten as if you borrowed all of it.
• Valuation: lines at or below $500,000 ordinarily use an automated valuation. Anything above $500,000 requires a full appraisal, and you can ask for one in any case.
• Title: the borrower must hold title individually or in a revocable living trust. LLCs, corporations, partnerships and irrevocable or land trusts cannot hold title on these lines.
• Property: single-family, 2-4 units, PUDs, townhomes and condos qualify. Manufactured homes, co-ops, condotels, log homes and commercial or mixed-use properties do not.
• Exposure: a borrower is limited to three lines, and owning more than 15 financed properties makes you ineligible.
• Availability: these lines are offered in 16 full-service states, narrower than Lendmire’s 41-market DSCR footprint.

Where the General Rule Breaks

The rule “interest-only first, then principal and interest” holds for many lines. These cases are where it does not.

Balloon structures. Experian notes that some HELOCs require a balloon payment of the entire balance plus accrued interest when the draw ends. Not every line works this way. You find out by reading the agreement. If a balloon is there, you will need to refinance or pay it off from other funds.

Short repayment windows. Twenty years is common, but it is not universal. Some contracts allow far shorter windows, which makes the step-up larger.

Principal during the draw. Some plans require a payment that includes a little principal. That portion typically does not retire the balance by the end of the term, so a balance can still remain when the draw ends. Paying principal early, when your contract allows it, can lower the payment you face during repayment.

Renewal. Some lenders allow you to renew the draw at the end. That is up to the lender, so plan as if the line will close.

Sale or refinance. The CFPB’s HELOC booklet says that if you sell your home, you are generally required to pay off the line in full right away. A refinance of your first mortgage usually means paying off or subordinating the line too.

Renting the home out. The same booklet warns that renting your home to others may be prohibited under the terms of a line made to an owner-occupant. If you plan to convert a primary home to a rental, read that clause first.

Availability is uneven, even among banks.

Property held by an entity. HELOC availability on LLC-owned rentals is limited. On the network lines above, an LLC cannot hold title. A property already deeded to an LLC needs a vesting change, or a different loan.

A Countdown to the Draw-End Date

Most borrowers read their note once, at closing, and never again. A calendar works better.

• 24 months out: find the draw-end date and write it down. Check whether the contract ends in a balloon or amortizes.
• 12 months out: ask your servicer for a payment projection at your current balance. Compare it with your rent, your first mortgage payment and your reserves.
• 6 months out: decide whether to pay the balance down, refinance, or move the debt into a different loan. Start gathering documents for any refinance.
• 3 months out: confirm your options in writing. If you cannot afford the new payment, call your servicer before you miss one, not after.

Run the stress test on the largest balance you might carry, not today’s. If rent coverage only works while the line is interest-only, the draw-end date is when the deal changes.

Key Terms Defined

Draw period: the window when you can borrow against the line, usually with interest-only payments.

Repayment period: the phase after the draw ends, when borrowing stops and you pay principal and interest.

Interest-only payment: a payment that covers accruing interest and leaves the balance unchanged.

Amortization: paying a balance down in scheduled installments until it reaches zero.

Balloon payment: a single large payment of the whole remaining balance at the end of the term.

Payment shock: the sudden jump in your bill when principal is added at the end of the draw.

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

When Rental Investors Move to a DSCR Cash-Out Instead

A HELOC suits a modest, flexible need on a property you own personally. It fits less well when the amount is large, the property sits in an LLC, or you want a fixed schedule. In those cases, many investors look at a DSCR cash-out refinance.

DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire’s complete DSCR loans guide explains the basics.

Here is how the network’s DSCR programs generally look, on most files:

• Cash-out: on a standard rental, leverage tops out around 75% LTV, and about six months of seasoning is the common expectation. On short-term-rental collateral, the cash-out ceiling is 70%.
• Coverage: 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger ratios open better pricing and leverage.
• Credit: a 620 floor exists in parts of the network, most programs want around 660, and 700+ unlocks the strongest leverage tiers.
• Loan size: up to $3,000,000 on standard programs (smaller balances available through select lenders).
• Reserves: commonly around six months of PITIA, which means principal, interest, taxes, insurance and any association dues. Conservative rate-and-term files at modest leverage under $1,500,000 can see reserves waived, and larger loans typically step up to about nine months.
• Structure: the spine is the 30-year fixed. Extended terms and interest-only periods are available through select lenders in the network, and ARM structures exist for investors who want them.
• Title: an LLC is commonly workable on DSCR files, subject to program terms.

Clearing 1.00 does not mean positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities and capex sit outside the calculation. A larger down payment can lift the ratio, but it never erases leverage caps, credit floors, reserve rules or property eligibility. Tax treatment can depend on how the funds are used and how the property is held. Borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.

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. You can reach the team at 828-256-2183 or request a quote through the mortgage quote page.

The draw-end date is the one number on a line that decides everything after it, so put it on your calendar before you draw a dollar.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges home equity lines of credit in its 16 full-service states through wholesale lenders, on primary residences, second homes and investment properties. Every line is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Experian – What is a draw period on a HELOC

2. NerdWallet – HELOC on an investment property

3. CFPB – What is a HELOC

4. Experian – How does HELOC repayment work

5. CFPB – What You Should Know About HELOCs (booklet)