HELOC FAQs — Draw Period, Repayment, and Variable Rates Explained

A HELOC gives you a revolving credit line up to a set limit, secured by your home equity. During the draw period (typically 5–10 years), you can borrow and repay repeatedly, making interest-only payments. When the repayment period begins, you can no longer draw and must pay principal plus interest.

The draw period (typically 5–10 years) allows you to borrow funds and pay interest only. The repayment period (typically 10–20 years) requires full principal and interest payments on your outstanding balance — this is when most borrowers experience payment shock.

During the draw period you pay only interest. In repayment, the same balance must be paid off in a shorter remaining term, resulting in significantly higher payments. On a $60,000 HELOC at 8.5%, the interest-only payment is $425/month; the P&I payment over 10 years is approximately $743/month — a 75% increase.

Almost all HELOCs have variable rates tied to the prime rate. The rate resets when the prime rate changes — typically when the Federal Reserve adjusts the federal funds rate. Some lenders offer a rate-lock option to fix a portion of your balance.

Lenders typically allow you to borrow up to 85% of your home's appraised value minus your outstanding mortgage balance. If your home is worth $400,000 and you owe $280,000, you may qualify for a HELOC up to $60,000 (85% × $400,000 − $280,000).

Multiply your mortgage balance by its rate and your HELOC balance by its current rate, add both products, then divide by your total balance. Use the Blended Rate Calculator to do this instantly.

Yes. Lenders can freeze or reduce your HELOC if your home's value drops significantly, your credit score falls sharply, or you experience financial hardship. This is one key risk vs. a fixed second mortgage.