Draw Period
The phase of a HELOC during which the borrower can withdraw funds up to the approved credit limit.
What is Draw Period?
The draw period is the initial phase of a home equity line of credit (HELOC) during which the borrower is permitted to withdraw funds up to the approved credit limit at will. Draw periods typically last 5 to 10 years, during which borrowers are usually required to make only minimum payments covering interest accrued on the outstanding balance. The flexibility to draw, repay, and redraw funds during this phase makes HELOCs attractive for ongoing expenses such as home renovations or education costs. Once the draw period ends, the HELOC enters the repayment period—typically 10 to 20 years—during which no additional funds can be drawn and the borrower must repay both principal and interest, often resulting in significantly higher monthly payments. This payment increase, sometimes called payment shock, can strain household finances if borrowers have not planned for the transition.
Example
A homeowner opens an $80,000 HELOC with a 10-year draw period starting in 2024 at a variable rate of 8.5%. They draw $40,000 for a kitchen remodel and pay interest-only at approximately $283 per month. In 2034, the draw period ends. They can no longer draw funds and begin a 15-year repayment period, with monthly principal-and-interest payments rising to approximately $395.