How long are HELOC loans? Understanding draw and repayment periods

If you've built equity in your home, a home equity line of credit (HELOC) could provide flexible access to funds for major expenses. Unlike a traditional loan, a HELOC is a revolving line of credit that can be used repeatedly during the borrowing phase.

But how long are HELOC loans? The typical HELOC lasts 15 to 30 years. The exact length depends on the loan and the lender. HELOC terms are divided into two phases:

• A draw period, when you can borrow, repay, and borrow again up to your credit limit

• A repayment period, when you can no longer draw from the line of credit and you must repay the remaining balance

Knowing how long each phase lasts can affect how you use your HELOC.

What is the typical HELOC term?

While HELOC term lengths vary by lender, they're most commonly structured in one of these ways:

• 15-year HELOC: Five-year draw period followed by a 10-year repayment period

• 20-year HELOC: Five-year draw period followed by a 15-year repayment period

• 20-year HELOC: 10-year draw period followed by a 10-year repayment period

• 30-year HELOC: 10-year draw period followed by a 20-year repayment period

The length of each phase affects how long you can access your credit line and how much time you'll have to repay the borrowed money. Many lenders offer a range of phase and term length options so you can choose what fits your situation.

How long is the draw period on a HELOC?

The draw period on a HELOC is typically about five to 10 years, though they can range up to 15 years in some cases. An Achieve Loans HELOC, for example, has a five-year draw period.

During the draw period, you can borrow up to the limit for that line of credit. If you pay back some of what you owe, that amount can be borrowed again later in the draw period. You can borrow, repay, and then borrow again over and over as long as you stay within your credit limit. The ability to borrow multiple times from the same line of credit is a key difference between HELOCs and home equity loans.

Some HELOCs have an initial draw requirement that means you need to withdraw some or all of your credit limit at closing. If you don't need the money yet, you can repay it right away. Other HELOC lenders let you choose how much you borrow from the beginning.

Here's an example of how a HELOC could work with a $20,000 line of credit and a 10-year draw period:

In this example, the homeowner was able to both borrow and repay money during the draw period. By repaying some of the money they borrowed, they could borrow more later on.

During the draw period, they were able to borrow an overall total of $23,000 from the HELOC. That’s more than the $20,000 line of credit, and it was possible because they also made two repayments to put money back into that line of credit.

During the HELOC draw period, you'll typically pay interest on whatever balance is outstanding. Some lenders let you make interest-only payments during the draw period, while others, like Achieve Loans, require principal-plus-interest payments from day one.

The advantage of paying back some of what you've borrowed during the draw period is that this could reduce the overall amount of interest that you pay over the course of using your HELOC.

How long is the HELOC repayment period?

A HELOC repayment period commonly lasts 10 to 20 years, depending on the length of the draw period and the overall HELOC term. It starts when the draw period ends. At that point, you can't borrow against your line of credit anymore. Your focus changes to paying off your remaining balance.

When the repayment period begins, you'll typically follow a schedule to repay the balance you owe over the repayment period. So, if you have a $30,000 balance and a 20-year HELOC repayment period, you'll likely make monthly payments to pay back the $30,000 over the next 20 years.

You might come across a HELOC that has balloon payments, though they’re rare. This means the repayment schedule doesn’t fully pay off your debt, leaving you with a large lump sum due at the end of the loan. Avoid lenders that structure HELOCs this way.

In addition to repaying what you owe on the HELOC, you'll also pay interest on the remaining balance. Some HELOCs have fixed interest rates during repayment, while others might have variable rates that can cause your monthly payments to change.

You might be able to repay your balance faster than scheduled to save on interest. Check your agreement for a prepayment penalty first. Like a balloon payment, prepayment penalties are rare for HELOCs, but double-check and read the fine print to be sure. 

Can HELOC terms be shorter or longer than 20 to 30 years?

Yes, while most HELOC terms are between 20 and 30 years, shorter or longer terms are also available, depending on the lender and loan you choose. 

HELOCs also vary in ways besides term length. Depending on the lender, they could have fixed or variable interest rates, different formulas for calculating variable rates, and different fee structures. These features can affect your borrowing costs and monthly payments over time.

Understand these details before choosing a HELOC. Compare the overall costs, not just the term length or interest rate. Also consider how you plan to use the HELOC, since your borrowing needs might help determine which loan structure is the best fit. 

What happens when a HELOC ends?

Typically, when a HELOC ends, you'll have repaid any remaining balance you owe, and your monthly payments will end. (Your ability to borrow from the HELOC ends earlier, when the draw period expires.)

If you need to borrow more money after the draw period, you could refinance by opening a new HELOC and using it to pay off the old one. If you simply need more time to pay back what you owe, you could refinance into a home equity loan with a longer term than the remainder of your repayment period. Read our comparison of cash-out refinancing vs. a home equity loan for a fuller breakdown of how that could work.

Is a longer HELOC term better or worse?

A longer HELOC term isn't automatically better or worse. It ultimately depends on your financial goals and how you plan to use the credit line. 

• Having a longer HELOC term could provide more flexibility, especially if it includes a longer draw period to borrow money. A longer repayment period could also result in lower monthly payments.

• Having a shorter HELOC term generally means you pay less interest over the life of the loan. Shorter-term loans might also come with lower interest rates, reducing the total cost of borrowing.

Think about both the draw period and the repayment period when you're deciding how long a HELOC loan should be to fit your financial goals:

• The draw period should be long enough to cover your expected borrowing needs.

• The repayment period should give you payments that fit comfortably within your budget.

Whether a longer HELOC term is better or worse depends on your situation. When you shop for a HELOC, start by thinking about how many years you’ll want to be able to borrow from the HELOC and how long you'll need to repay what you borrow. A HELOC payment calculator can also help you estimate how different repayment periods could affect your monthly payment.

Once you know which timeframe meets your needs, you can compare HELOC options from different lenders that fit your situation. Use prequalification to check estimated rates without affecting your credit score. 

Get a quote for a fixed-rate HELOC through Achieve Loans.