The Quick Read: Match the draw period to how long you will keep the money working, and match the repayment term to the payment your rental or household income can carry once principal starts, because on this network at least 75% of the line is drawn at closing and pricing floats throughout. The choice is really two linked decisions: how long you pay interest only, and how steep the payment step-up is when amortization begins.
- On an investment property, the network runs one structure: a 5-year interest-only draw, then a 25-year fully amortizing repayment.
- On a primary residence or second home, a 3-year draw with a 17-year repayment is also available, subject to lender guidelines.
- Interest-only payments leave the balance where it started, so the repayment payment is set by the balance on the switch date.
- A shorter repayment term means a bigger step-up. A longer one lowers the step-up but keeps you in debt longer.
- Pricing floats in both phases and never converts to a fixed payment on these lines.
What Are the Draw and Repayment Periods?
The draw period is the stretch when the line is open and payments are usually interest only. The repayment period begins on a date fixed in the contract. The line freezes, and the balance outstanding that day is paid down over the repayment term.
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.
Total life is the two added together. A 5-year draw plus a 25-year repayment is a 30-year line. A 3-year draw plus a 17-year repayment is a 20-year line. Experian reports draw periods that typically run five to 10 years, with a 20-year repayment period after it. That is a market-wide convention, not a rule, and it is not the structure on this network. Each contract fixes its own lengths.
Many borrowers assume the draw period is the loan term. It is not. A 3-year draw feels very different from a 5-year draw, even when both lines run to similar total lengths.
How Do the Two Phases Work Step by Step?
Four steps cover the whole mechanism, and underwriting treats each one differently.
1. Closing and the initial draw. At least 75% of the line is drawn at closing on both wholesale-network programs. The line is therefore not a standby reserve. It behaves more like an interest-only loan with a small amount of room left to borrow.
2. The draw period. You pay interest on what you have drawn. Because payments are interest only, principal does not fall. Follow-up draws after closing carry a minimum amount, so ask about it before you count on small, frequent advances.
3. The switch. On the contract date, the line closes to new advances. Any unused credit disappears. The balance is then amortized over the repayment term.
4. Repayment. Principal and interest are both due. Pricing keeps floating, so the payment can still move.
Underwriting is reviewed around the interest-only payment calculated on the maximum draw. DTI tops out at 50%, and it is 45% for credit profiles from 600 to 679. A ratio above 45% requires a 680 minimum. Those tests use your personal income and debts. They do not use the rental’s cash flow, so DSCR plays no role in approving the line.
Here is the catch. Qualifying on the interest-only payment tests your budget in the easy phase. The harder phase comes later, and you have to test it yourself.
Which Structures Exist on This Network?
The structure depends on occupancy. The table below summarizes it. Every figure is subject to lender guidelines and full file review, and Lendmire is a broker, not the lender.
| Occupancy | Draw / repayment | Max CLTV | Max line |
|---|---|---|---|
| Investment property | 5 years / 25 years only | 70% | $500,000 |
| Second home | 3/17 or 5/25 | Up to 90% at 720+ | $500,000 |
| Primary residence | 3/17 or 5/25 | Up to 90% at 720+ | $750,000 |
Read the ceilings carefully. On an investment property, 70% CLTV is the top, and the minimum credit profile is 700. The 90% figure applies only to primary residences and second homes, and only at a 720-or-better credit profile. Lower credit tiers step the ceiling down. A primary residence at 640 tops out at 80%, for instance.
Two other variations matter for this decision. Tennessee shortens both structures, to 3 years / 12 years and 5 years / 10 years. And a line above $500,000 is for primary residences only, needs a full appraisal, and caps at 75% CLTV. For that size the credit requirement is 700 or better, and 720 on the 5-year structure.
Properties eligible include single-family, 2-4 units, PUD, townhome, and condominium, including non-warrantable condos. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural zoning are not eligible. Title must sit with the individual borrower or a revocable living trust. An LLC cannot hold title, so a property already deeded to an LLC needs a vesting change, or a DSCR cash-out refinance is the better route.
Availability is also narrower than the DSCR footprint. These lines are offered in Lendmire’s 16 full-service states, not the 41 markets covered by its DSCR programs.
How Do You Pick Both Terms? A Four-Step Process
Start with your plan, not the term menu. Work through these steps in order.
Step 1: Map when the money gets used. Because most of the line is drawn at closing, the draw period is mostly a window of interest-only carry. If the cash all goes out on day one, a long draw gives you more time at a low payment. It also gives you more time with a balance that never shrinks.
Step 2: Decide when you want the line gone. A short-hold investor who plans to refinance out of the line has a different exit than a long-hold owner who intends to pay it off from cash flow. Name the exit date before you choose.
Step 3: Stress-test the repayment payment. Take the balance you expect on the switch date. Assume it amortizes over the full repayment term. Then assume pricing has moved higher by then. Ask whether your income, or the property’s rent, still covers that payment plus taxes, insurance, repairs, and vacancy. If the answer is only “barely,” the structure is too tight.
Step 4: Check the structure itself. Read the agreement for balloon features, minimum draw rules, prepayment penalties, and any penalty for overpaying. The CFPB’s HELOC booklet gives a shopping checklist with separate lines for draw length and repayment length, plus index, margin, caps, and fees. It also warns that renting out the home may be prohibited under a line’s terms. On an investment line that refers to the pledged property, so confirm the lender expressly allows rental use.
Draw Length Tradeoffs
A longer draw means a lower payment for longer. That helps a rehab or a lease-up period that needs breathing room. It also means more years of paying interest without reducing principal, and the step-up arrives later but lands just as hard.
A shorter draw starts amortization sooner. You build equity earlier and carry less balance into the later years. The cost is a larger payment sooner, which can collide with acquisition and rehab costs.
On a primary residence or second home, the 3-year versus 5-year choice is real. On an investment property it is not, since the 5-year draw is the only structure. That narrows your job to managing the balance, not shopping lengths.
Repayment Length Tradeoffs
Repayment length is the lever on the step-up. A 17-year amortization asks for more principal each month than a 25-year one on the same balance. The shorter term costs less interest overall, but it presses harder on monthly cash flow.
A longer repayment term eases the step-up and leaves more room for vacancy or repairs. It costs more in total interest if you carry the balance to the end, though nothing stops you from paying extra when cash allows.
This is a genuine toss-up for many investors. If your cash flow is thin, the longer term is safer. If the rent coverage is strong and you want the debt gone, the shorter term makes sense. The same logic applies to pricing risk. Because pricing floats during repayment, a longer term gives you more cushion against movement.
Bankrate notes that HELOCs are typically variable, that some plans carry a balloon at the end of the draw, and that a fixed-rate HELOC behaves more like a home equity loan. On this network none of those fixes apply. The line stays floating in both phases, so plan for movement.
Which Plan Fits Which Posture?
The table below is directional. It is not a program menu.
| Plan | Draw posture | Repayment posture |
|---|---|---|
| Buy and rehab, then refinance out | Shorter draw is fine | Term matters little if paid off |
| Long-hold, pay down from rent | Longer draw, but pay principal | Longer term for cushion |
| Bridge a down payment | Match draw to purchase timeline | Longer term to ease step-up |
| Flexible standby reserve | Poor fit: 75% drawn at closing | Not applicable |
A line that must be mostly drawn at closing rarely works as an emergency reserve. If you want standby borrowing power, look at whether this structure fits at all.
A Worked Example With Ratios, Not Dollars
Run the numbers on an investment property with a 5-year draw and 25-year repayment. Suppose rents cover the interest-only payment at roughly 1.5x. That is a modeled assumption, not a market fact.
Once amortization begins, the payment steps up. The balance has not fallen, because the draw payments were interest only. The step-up is set by the balance and the 25-year term. If pricing has also moved higher, coverage can slide toward 1.1x or less. Those ratios are illustrative, and they exclude repairs, vacancy, and management.
Now imagine a shorter repayment term on the same balance. The step-up is larger, and coverage could drop toward 1.0x or below. So the fix is not always a shorter term. If you want a shorter term, pay principal during the draw so the balance on the switch date is smaller.
An important point: this ratio is a personal stress test, not an underwriting test. These lines are underwritten on equity, credit, and DTI. DSCR compares rent to PITIA only on a DSCR loan. Clearing 1.0x does not mean positive cash flow either. Repairs, vacancy, management, utilities, and capex sit outside the calculation.
How Do You Shrink the Step-Up?
Four moves work, listed here by how much control you have.
- Pay principal during the draw. Even modest extra payments reduce the balance that gets amortized. This is the most reliable move you control.
- Refinance before the switch. A take-out DSCR refinance is the usual exit for a rental held past the draw. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire’s complete DSCR loans guide explains how that structure works.
- Choose the longer repayment term when you have the choice. This applies on primary and second-home lines.
- Keep reserves. Pricing movement is the second driver of payment shock, and reserves are the buffer.
Questions to Ask Before You Sign
Ask the lender these directly, and get the answers in writing.
1. Which phase does the quoted term describe: draw, repayment, or total life?
2. What is the exact switch date?
3. Is there a balloon, or does repayment amortize fully?
4. What is the minimum for each follow-up draw?
5. Can I pay extra principal, and is there any penalty?
6. Is rental use of the property allowed?
7. Who must hold title, and does my entity structure qualify?
Two more checks matter for investors. A borrower is limited to three lines, and a borrower with more than 15 financed properties is not eligible. If you are scaling beyond that, a DSCR structure is usually the practical lane.
What If Your Plan Changes?
Plans change, and the term should survive that. If you need money after the draw ends, you cannot re-borrow. The line is closed, and unused credit is gone. That is a reason to avoid sizing the line on a hope.
If you sell, expect to repay the line in full. If you want out early, check for prepayment terms before signing. If your income drops, the repayment payment does not adjust with it. A DSCR refinance or a sale is the usual way out when the amortizing payment no longer fits.
Key Terms Defined
Draw period: The window when the line is open and you can borrow against it, usually with interest-only payments.
Repayment period: The phase after the draw, when the line is closed and principal and interest are due.
Total life: The draw period plus the repayment period.
CLTV: Combined loan-to-value, which counts all liens against the property’s value.
Payment shock: The jump in the monthly payment when interest-only payments give way to amortization.
Balloon: A structure that demands the full balance when the draw ends.
Frequently Asked Questions
Is a longer draw period always better?
No. A longer draw lowers the payment for longer, but principal stays flat, so the balance you carry into repayment is the same. It suits borrowers who need time before cash flow arrives. It works against borrowers who would otherwise pay principal early. Pair a long draw with a plan to pay principal down.
Can I choose between a 3-year and 5-year draw on a rental?
Not on this network. Investment lines run only the 5-year draw with a 25-year repayment, with a 70% CLTV ceiling and a 700 minimum credit profile. The 3/17 option applies to primary residences and second homes. Tennessee shortens both structures, subject to lender guidelines.
Does the repayment rate convert to fixed after the draw?
No. Pricing floats in both phases and never converts to fixed on these programs. That is why a stress test at higher pricing matters. Market surveys describe fixed conversion options on some consumer lines, but that is not part of this network.
Does the line qualify on rental income like a DSCR loan?
No. These lines are underwritten on equity, credit, and DTI, not on property cash flow. If you want rent coverage to carry the file, a DSCR loan is the better fit. Select lenders in the network also offer coverage below 1.00 with leverage and terms adjusted.
Can my LLC take out the line?
No. Title must be held by the individual borrower or a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. A property already in an LLC needs a vesting change, or a DSCR cash-out is the alternative.
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. For a closer look at how terms divide between phases, see Lendmire’s piece How a HELOC Splits Its Term Between Draw and Repayment, or its explainer HELOC Term Length Rules for Draw and Repayment Phases.
For current guidelines and terms, see Lendmire’s home equity page.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and real estate investors in its 16 full-service states open home equity lines of credit arranged through wholesale lenders. Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about two minutes you can review financing options available for your home or investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Experian — What Is a Draw Period on a HELOC
3. Bankrate — Pros and Cons of HELOCs
This article is part of Lendmire’s HELOC & home equity loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: HELOC Rules for a Vacation and Home Repairs on One Draw · Can You Convert a HELOC Balance to Fixed During the Draw Period? · Typical HELOC Term Length Across Draw and Repayment Periods
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.