The Quick Read: When a HELOC’s draw period ends, you can no longer borrow, and the minimum payment is recalculated from interest-only (or a small minimum) to full principal and interest over the repayment term, so the payment usually jumps right away. Its size depends on your balance, the term length, and how the line’s pricing floats. Rent rarely rises to match, which is why rental owners feel this harder than anyone.
- Borrowing stops, and the balance on the last draw day is what gets paid down.
- Three things set the new payment: the balance, the repayment length, and the index the line floats on.
- Some lines end in a balloon instead of a repayment phase, which is a different problem.
- Your agreement holds the exact dates and terms. Find them months ahead.
- The usual investor exits are paying down, renewing, or replacing the line with a DSCR cash-out refinance.
A home equity line of credit (HELOC) works like a credit card secured by property. The draw period is the stretch when you can borrow. The repayment period comes after. The surprise is rarely hidden. It was written into the agreement on day one, but many owners stop thinking about it after the first few years.
How large a line the equity supports.
An equity line is sized by combined loan-to-value, occupancy, and credit — not by rental coverage. Switch the occupancy or the credit band and the ceiling moves with it.
Investment-property lines require a 700 minimum credit score; second-home lines start at a 640 minimum and primary-residence lines at 600, and the combined-LTV ceiling steps down as the credit band drops on primary-residence and second-home lines and holds on investment-property lines; the line cap steps down on primary-residence lines and holds at every tier on investment-property and second-home lines.
A debt-to-income ratio above 45% requires 680+ credit. Profiles under 640 are limited to single-family homes. At least 75% of the approved line is drawn at closing. Ceilings, floors, and caps update from Lendmire’s centralized guideline source.
Line estimate
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. The rate is an editable assumption; equity-line pricing is variable through both the draw and repayment periods and never converts to fixed. Occupancy and credit drive the ceiling together: an investment property tops out at 70% combined LTV (minimum credit 700, line cap $500,000); a second home tops out at 90% combined LTV (minimum credit 640, line cap $500,000), with the ceiling stepping down as the credit band drops (the cap holds at every tier); a primary residence tops out at 90% combined LTV (minimum credit 600), and its $750,000 maximum line is available only at 75% combined LTV or below with a 700-or-better credit profile (720 on the longer-runway program) and a full appraisal. Lines above $500,000 require a full appraisal. Credit, debt-to-income, property type, and full underwriting review all affect the final line.
Key Terms Defined
Draw period: The window set in your agreement when you can borrow against the line, often with interest-only minimum payments.
Repayment period: The phase after the draw ends, when you can’t borrow and must pay the balance down over a set term.
Amortizing: Paying a loan off in scheduled installments so each payment covers interest plus some principal.
Interest-only payment: A payment that covers only the interest, so the balance doesn’t shrink.
Balloon payment: A lump sum due at a set date because the minimum payments didn’t pay the balance off.
DSCR (debt service coverage ratio): Monthly rent divided by the full monthly obligation. The obligation is PITIA: principal, interest, taxes, insurance, and any association dues.
CLTV (combined loan-to-value): All loans on the property added together, divided by its value.
What Changes on the First Repayment Month
Four things change at once: access, payment type, principal, and what happens to unused credit. The pricing usually keeps floating. That is why the new payment is more than a rate story. The structure of the loan itself changes.
| Factor | Draw period | Repayment period |
|---|---|---|
| Borrowing | Open, up to the limit | Closed |
| Payment type | Interest-only or small minimum | Principal plus interest |
| Principal | Untouched or barely touched | Paid down on a schedule |
| Unused credit | Available to draw | Gone |
| Pricing | Usually floats | Usually still floats |
The CFPB’s HELOC explainer describes the same pattern. Draws stop, repayment begins, and monthly payments are often significantly higher. It adds that the lender may set a schedule over roughly ten or 20 years. In some cases the whole balance is due when repayment starts.
Paying principal during repayment does not reopen the line. Once the draw window closes, it stays closed.
The Three Things That Set the New Payment
The new payment comes from the balance, the repayment term, and the line’s pricing. Each pushes the number on its own. Together they can produce a large step.
1. The balance at conversion. The balance outstanding on the last draw day is what gets amortized. A larger balance means a larger payment. Nothing else moves the number as directly.
2. The repayment term. A shorter term squeezes the same balance into fewer payments. Experian describes typical draw periods of five to 10 years followed by a 20-year repayment period, and says some lines offer longer draws. Bankrate says draws are normally five, 10, or 15 years, with 10 most common, and repayment typically runs 10 to 20 years. Those are market-wide ranges. On the investment-property HELOC lines Lendmire arranges through select wholesale partners, the structure is a 5-year interest-only draw followed by a 25-year fully amortizing repayment.
3. The pricing and index. Most HELOCs float. On the investment lines in Lendmire’s network, pricing floats through both the draw and repayment periods and never converts to fixed. When the index moves, the payment moves, even with no new borrowing.
A falling index can cushion the jump. It rarely cancels it, because the shift from interest-only to amortizing is built into the structure.
Picture a rental that cleared the interest-only payment with a coverage ratio around 1.5x (a modeled assumption, not a market figure). Add principal over a shorter term and that same rent can slip toward 1.0x or below, with nothing about the tenant or the lease changing.
How to Find and Estimate Your Own New Payment
Your agreement answers most of this. Pull the HELOC contract, the disclosure you signed at opening, and a few recent statements. Then look for five items:
- The exact date the draw period ends.
- The length of the repayment term.
- The index and margin that set the pricing, plus any caps.
- Whether the plan amortizes or ends in a balloon.
- Whether the contract lets you convert part or all of the balance to fixed.
The draw-period payment on an interest-only line is the balance times the annual interest percentage, divided by 12. After conversion, the minimum payment covers the remaining interest and pays the loan off by the end of the term.
To estimate the new figure, run your end-of-draw balance through any standard amortization calculator using the repayment term and the current index plus margin. Then run it again with the index higher and lower. Any illustrative calculator gives a planning estimate only. Your lender’s statement is the number that counts.
Also ask the lender for its pre-conversion notice. Many lenders send one ahead of the draw end, but the timing varies, so don’t wait for it. A federal exam guide from the NCUA describes a written notice at least 15 days before a changed term or increased minimum payment takes effect on these plans. Whether a step-up already written into your original contract triggers that notice isn’t settled by that guidance, so treat the notice as a courtesy, not a plan.
Which Structure Do You Have?
Not every HELOC follows the standard script. Check your agreement against this table.
| Structure | What happens at draw end | Size of the change |
|---|---|---|
| Interest-only draw, amortizing repayment | Payment converts to principal plus interest | Often large |
| Partial-principal minimum | Small step-up | Smaller, but balance may stay large |
| Balloon | Full balance due | A payoff deadline, not a step-up |
| Principal and interest from day one | Little change | Small or none |
| Renewal or extension available | Draw clock may restart | Lender-dependent |
Balloon lines. A balloon line has no gentle repayment phase. The balance is due, and you need a sale, a payoff, or a refinance. Don’t assume the refinance will work. It depends on equity, credit, and rental income at that moment. The CFPB brochure also notes that even where minimum payments include some principal, that portion typically won’t retire the loan by the end of the term.
Fixed-rate conversion. Some agreements let you lock part or all of the balance during the draw. That can steady the payment, but it doesn’t remove the amortization step.
Renewal. Some lenders let you renew or refinance and restart the draw clock. That is the lender’s call and it usually means re-qualifying.
Freezes versus draw endings. A lender freezing or cutting your line is a separate event from the scheduled draw end. Beacon Law Partners draws the same line and notes that principal now has to be repaid over a shorter stretch than a first mortgage would use. If your access disappeared early, read what your lender said and what your agreement allows before you assume the draw ended.
Why Rental Owners Feel It Harder
Rent doesn’t step up when the payment does. A lease renews on its own schedule, and the market sets the number. A HELOC conversion follows the contract.
A DSCR compares rent to the full monthly obligation, not just the HELOC. A HELOC on the property adds to what the property must carry. When the payment rises, the same rent covers less. A refinance lender will see that.
Clearing 1.00x also isn’t the same as positive cash flow. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation. A rental can look fine on paper and still bleed once those are counted. Treat the higher payment as a cash-flow question first and a coverage question second.
One more point on risk. The HELOC is secured by the property. If the payment becomes unmanageable and goes unpaid, the lender can pursue the collateral. For an investor that means the rental itself.
Timeline: What to Do at 12, 6, and 3 Months Out
Start earlier than feels necessary. Equity, credit, and rent all take time to document.
- About 12 months out: Pull the agreement. Confirm the draw end date, the repayment term, and whether you have a balloon. Estimate the new payment at a few index levels.
- About 6 months out: Check the property’s equity and your credit. Decide whether to pay down, hold, or replace the line. If you plan to refinance, ask a broker to screen the file.
- About 3 months out: Have your exit lined up. Gather leases, insurance, and statements. Ask the lender to confirm the first due date at the new payment.
Lendmire’s piece How to Handle a HELOC Whose Draw Period Ended or Payment Jumped covers the situation after the date has passed.
If the New Payment Is Too High
You have four realistic paths. Which one fits depends on the balance, the equity, and what the rent supports.
| Option | Best when | Watch for |
|---|---|---|
| Keep the schedule | Rent still covers the new payment | Thin cushion if the index rises |
| Pay down during or before repayment | You have spare cash | Doesn’t reopen the line |
| Renew or extend | Lender offers it | Re-qualification, restart of the clock |
| Replace with a DSCR cash-out refinance | Equity is strong, rent qualifies | Must cover the first mortgage and HELOC together |
Paying principal during the draw reduces what you owe when the line closes. Every dollar paid early is a dollar that never sits inside the higher repayment payment.
Replacing the line with a DSCR loan. A DSCR loan is built for non-owner-occupied investment properties. Because it is a business-purpose loan, it is reviewed differently from an owner-occupied mortgage. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.
Across the network, most cash-out refinances on standard rentals top out around 75% LTV, with about 6 months of seasoning commonly expected. The new loan has to pay off the first mortgage and the HELOC together, so leftover equity decides whether it works. Coverage of 1.00 is where select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Credit floors vary: a 620 floor exists in parts of the network, most programs want around 660, and 700 or better unlocks the strongest leverage tiers. Reserves commonly run around 6 months of PITIA, but they shift with leverage, loan size, and transaction type. Lendmire’s piece How to Pay Down or Replace an Existing HELOC After Its Draw Period Ended goes deeper on that choice.
Terms matter too. The spine is a 30-year fixed, and select lenders in the network also offer 40-year terms, interest-only periods, and ARM structures for investors who want them. The complete DSCR loans guide walks through the full program.
Replacing it with another HELOC. A new HELOC is possible but narrow. On an investment property, Lendmire’s wholesale partners offer lines up to $500,000, a 70% CLTV ceiling, and a 700 minimum credit score. The line must be held by an individual or a revocable living trust. An LLC can’t hold title, so a rental deeded to an LLC needs a vesting change or the DSCR route instead. HELOC availability through Lendmire is also limited to 16 full-service states, narrower than its DSCR reach of 41 markets, including Washington, D.C. Every figure is subject to lender guidelines and a full file review.
Common Misconceptions
“The payment only changes if rates rise.” The switch to amortizing raises it on its own. Pricing moves stack on top.
“Interest-only means I owe less.” The principal is untouched. Interest-only defers it.
“The lender changed the deal.” The draw end and repayment terms are in the agreement from the start.
“There is always a repayment period.” Some lines end in a balloon.
“I’ll just refinance.” That depends on equity, credit, and rental income when the time comes. Don’t treat it as guaranteed.
“Repaying principal reopens the line.” It doesn’t. Once draws stop, they stay stopped.
Frequently Asked Questions
What happens to my HELOC payment when the draw period ends?
It is recalculated to cover principal and interest over the repayment term. If you were paying interest-only, the payment typically rises. The step is usually the largest on lines with a short repayment term and a big balance. Your agreement states the term.
How much will my payment change?
It depends on the balance, the repayment term, and the index. No reliable industry figure applies to every line, so work from your own agreement. Run the balance through an amortization calculator at a few index levels to see the range.
Does my pricing become fixed at repayment?
Usually not. Many lines keep floating, and some agreements let you convert part or all of the balance to a fixed structure during the draw. On the investment lines in Lendmire’s network, pricing floats and never converts to fixed.
Can I extend or renew the line?
Sometimes. Renewal is the lender’s decision and typically involves re-qualifying. If you want the option, ask well before the draw ends.
What if I can’t afford the new payment?
Compare four paths: pay down, hold the schedule, renew, or replace the line. For a rental, a DSCR cash-out refinance can be one route if equity and rent support it. Tax treatment can depend on how the funds are used and how the property is held. Keep clear records and speak with a qualified tax professional before relying on any deduction.
Next Steps
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. Lendmire is a broker arranging financing through select lenders in its wholesale network, and nothing here is a commitment to lend.
An ending draw period is a date on a calendar, and rental owners who plan for it a year ahead have the most choices.
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.
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References
1. CFPB – What is a home equity line of credit (HELOC)?
2. Experian – What is a draw period on a HELOC?
3. Bankrate – What is an interest-only HELOC?
4. NCUA – Truth in Lending Act exam guide
5. Beacon Law Partners – Home equity loans and HELOCs: draw periods, freezes, and rescission rights
This article is part of Lendmire’s home equity line of credit program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Bank Statement HELOC Payment Shifts for Business Owners at Repayment · New HELOC vs Cash-Out Refinance for a Draw Period That Ended · HELOC Repayment Terms When the Line Is From Another Lender
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.