How does a HELOC work?

Your maximum line amount is based on the amount of equity you have in your home, your creditworthiness, your debt-to-income ratio, and other factors. Typically, HELOCs have a 20–30 year term with two distinct phases:

  1. the initial draw period which can last up to 10 years, and
  2. the repayment period which can last 10–20 years

Term: HELOCs usually have a 20–30 year term, which is the total duration of your draw period + your repayment period.  

Draw Period During the draw period, you can use up to your maximum line amount, and you may also make interest-only payments2, which can result in a lower monthly payment. Your draw period may last up to 10 years. 

Repayment Period: During the repayment period, you can no longer draw on your line, and you must start paying back any outstanding balance plus interest. Your repayment period may last up to 20 years.