HELOC Draw vs. Repayment Period: How to Calculate What You'll Actually Owe

The Two-Phase Structure Every HELOC Borrower Must Understand

A home equity line of credit operates in two distinct phases with completely different payment mechanics. During the draw period, typically 10 years, the lender charges interest only on the outstanding balance. During the repayment period, typically 20 years, the full balance becomes a fully amortizing loan. The monthly payment formula changes entirely between phases. Borrowers who plan only for the draw period payment are modeling the cheaper of the two phases and ignoring the one that matters most for long-term cash flow.

Most HELOCs carry variable rates indexed to the Wall Street Journal Prime Rate. As of mid-2025, Prime sits at 7.50%. Most lenders price HELOC rates at Prime plus a margin of 0.50% to 2.00%, producing effective rates of 8.00% to 9.50% for well-qualified borrowers.

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How to Calculate a HELOC Draw Period Payment

The draw period payment equals interest only on the current outstanding balance. No principal reduction occurs.

Formula: Monthly Payment = (Annual Rate / 12) x Outstanding Balance

Example 1: $60,000 balance at 8.75% APR

• Monthly rate: 8.75% / 12 = 0.7292%
• Monthly payment: 0.007292 x $60,000 = $437.50

That $437.50 retires zero principal. After 10 years of draw period payments at that balance, the borrower still owes $60,000.

Example 2: $120,000 balance at 9.25% APR

• Monthly rate: 9.25% / 12 = 0.7708%
• Monthly payment: 0.007708 x $120,000 = $924.96

Again, $0 of principal paid. The repayment period begins with the full $120,000 outstanding.

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How to Calculate a HELOC Repayment Period Payment

The repayment period converts the outstanding HELOC balance into a fully amortizing loan, exactly like a standard mortgage. The repayment term is almost always 20 years (240 months), though some lenders use 15 years.

Formula: Monthly Payment = P x [r(1+r)^n] / [(1+r)^n - 1]

Where P = principal balance, r = monthly interest rate, n = number of months.

Example 1: $60,000 balance at 8.75% APR, 20-year repayment

• P = $60,000
• r = 0.007292
• n = 240
• (1 + 0.007292)^240 = 5.6993
• Numerator: 0.007292 x 5.6993 = 0.041560
• Denominator: 5.6993 - 1 = 4.6993
• Monthly payment: $60,000 x (0.041560 / 4.6993) = $60,000 x 0.008844 = $530.64

The draw period payment was $437.50. The repayment period payment is $530.64. That is a $93.14 monthly increase, or 21.3% higher, on the same $60,000 balance.

Example 2: $120,000 balance at 9.25% APR, 20-year repayment

• P = $120,000
• r = 0.007708
• n = 240
• (1 + 0.007708)^240 = 6.2743
• Numerator: 0.007708 x 6.2743 = 0.048362
• Denominator: 6.2743 - 1 = 5.2743
• Monthly payment: $120,000 x (0.048362 / 5.2743) = $120,000 x 0.009169 = $1,100.28

The draw period payment was $924.96. The repayment period payment is $1,100.28. That is a $175.32 monthly increase on the same balance.

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Why the Payment Shock Is Often Worse Than the Math Suggests

The two examples above assume a static interest rate. HELOCs are variable-rate instruments. If Prime rises 1.50 percentage points between the start of the draw period and the start of the repayment period, the repayment payment on that $120,000 balance at 10.75% APR rises to roughly $1,233 per month. That is $308 per month more than the draw period payment the borrower budgeted during year one.

Three compounding factors amplify the shock:

1. Borrowers often increase the balance late in the draw period. Tapping an additional $20,000 in year 9 gives almost no time to reduce the balance before repayment starts.
2. Income may not have risen proportionally. A payment increase of $400 per month is $4,800 per year in after-tax cash flow.
3. Other debt obligations may have grown. A borrower carrying auto loans and credit card balances alongside a HELOC repayment period payment can breach standard debt-to-income thresholds, limiting refinancing options.

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How Rate Changes Affect Both Phases

A 1.00 percentage point increase in the HELOC rate on a $80,000 balance produces the following changes:

Each 1.00 point increase adds $66.67 to the draw period payment and roughly $55 to $56 to the repayment period payment on this balance. The draw period payment moves proportionally with rate. The repayment period payment is less rate-sensitive because principal amortization dominates the later payment stream.

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The $80,000 HELOC: Full Side-by-Side Comparison

This example uses a $80,000 HELOC at 9.25% APR with a 10-year draw period and a 20-year repayment period.

Draw period payment (interest only): 0.007708 x $80,000 = $616.64 per month

Total draw period cost (120 months, no principal paid): $616.64 x 120 = $73,996.80 in interest alone

Repayment period payment (20 years, 240 months): Using the amortization formula: $1,020.41 per month

Total repayment period cost: $1,020.41 x 240 = $244,898.40 ($80,000 principal + $164,898.40 interest)

Combined lifetime cost of the HELOC: $73,996.80 + $244,898.40 = $318,895.20 to borrow $80,000.

That figure assumes rate stability throughout. Any upward rate movement over 30 years increases the total meaningfully.

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Three Scenarios Where Early Paydown Changes the Math

Paying down HELOC principal during the draw period reduces the repayment period starting balance. This directly lowers the repayment period payment.

Scenario A: No paydown. $80,000 balance enters repayment at 9.25%. Monthly repayment payment: $1,020.41.

Scenario B: $20,000 paydown during draw period. $60,000 balance enters repayment at 9.25%. Monthly repayment payment: $765.31. Monthly savings: $255.10.

Scenario C: $40,000 paydown during draw period. $40,000 balance enters repayment at 9.25%. Monthly repayment payment: $510.21. Monthly savings: $510.20.

The decision to make principal payments during the draw period is a direct purchase of a lower repayment period payment. At $255.10 per month, Scenario B saves $61,224 in repayment period payments over 20 years.

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Run Your Specific HELOC Numbers Before You Draw

The formulas above are exact, but every HELOC has a specific balance, rate, draw period length, and repayment term. Plugging the wrong number into even one variable produces a payment estimate that could be off by $100 to $300 per month on a typical balance. The CalcMoney Mortgage Calculator handles full amortization math for any principal, rate, and term combination. Use it to model the repayment period payment at your current balance, then model it again at the balance you expect to carry into repayment. The difference between those two outputs is the cost of every dollar you borrow and do not pay back during the draw period.

Calculate your HELOC repayment period payment now →

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Results are estimates for informational purposes only. Consult a licensed financial professional before making financial decisions.