HELOC is repaid through converting the revolving line of credit into a term loan with regular monthly payments. Repayment requires borrowers to make periodic monthly payments that include both interest and principal on the borrowed amount. In a typical HELOC repayment scenario, payments increase by 68% on average from payments made during the draw period, with the national average payment going from $287 during the draw period to $483 during repayment in 2024. Based on Ilyce Glink, real estate writer and author of 100 Questions Every First-Time Home Buyer Should Ask, When HELOC repayment begins, most homebuyers are caught off guard by payments if they have not budgeted for the transition from interest-only to fully amortized payments.

The HELOC payment term is the duration within which borrowers repay principal and interest on what they borrowed after the draw period has elapsed. The payment term is typically 10 to 20 years, though the majority of lenders have set 15 years as default. Federal Reserve statistics show that as of March 2024, the average HELOC repayment term by the largest 50 U.S. lenders is 15.3 years, and 73% of all HELOCs have repayment terms between 10-20 years. As per Greg McBride, Chief Financial Analyst at Bankrate, The length of the HELOC repayment period is most critical to affordability, as shorter terms come with greater monthly payments but pay less in long-term
interest.

Yes, you can extend your HELOC repayment period by refinancing your existing HELOC or negotiating with your lender for revised terms. Extending the repayment term requires qualifying based on home equity, income, and credit score. Industry figures show that roughly 32% of HELOC borrowers qualify to extend terms, with the average extension adding 7.3 years to the original term, but only adding an average of $18,425 in total interest paid throughout the life of the loan. In the opinion of Michele Raneri, Vice President of U.S. Research and Consulting at Experian, Extending the repayment period of a HELOC can provide relief in monthly payments, but borrowers must consider carefully the large additional interest they will pay over the extended period.

The HELOC draw period is the first stage where borrowers borrow funds and typically make interest-only payments, whereas the repayment period is the subsequent stage where full principal and interest payments are made. The draw period typically lasts between 5-10 years, and the repayment period takes a minimum of 10-20 years. Mortgage Bankers Association statistics suggest that in 2024 new HELOCs carry an average draw period of 9.2 years during which they have an average tenure of 15.4 years to repay, incurring interest on average of 8.78% during this time while rolling over from one to the other. As Holden Lewis, NerdWallet mortgage expert, has noted, The contrast between these two phases is remarkable—the draw phase is inexpensive with its interest-only payments, but the repayment phase is where self-control is the answer.

HELOC repayment will affect your credit score primarily in terms of payment history, utilization of credit, and changes to the credit mix. Timely monthly payment can facilitate improvement in the credit score via establishment of satisfactory payment history. FICO facts indicate that after transitioning from the HELOC drawing phase to paying back, the borrowers whose use level exceeds 50% undergo an average transitory decrease by 15-30 points; however, usually, the score recovers between 6-9 months subsequent to consistent regular payments. As detailed by Rod Griffin, Experian’s Senior Director of Public Education, The transition to HELOC repayment tends to produce temporary credit score movement, but timely repayment behavior almost always results in better scores over time as you reduce your total debt burden.

Yes, there is a minimum monthly payment on a HELOC, typically a percentage of the current balance or a set amount as assigned by the lender. The minimum payment during the draw period typically only covers interest, and in repayment it covers principal as well. Recent data from the Consumer Financial Protection Bureau show the average minimum payment during the draw period is 1.5% of balance outstanding with a minimum of $100, and repayment period lows average $267 per $10,000 financed at prevailing interest rates and a 15-year repayment period. HELOC minimum payments can create a false sense of affordability during the draw period—borrowers must voluntarily pay more than the minimum or else face payment shock when the repayment period begins, said Bob Broeksmit, President and CEO of the Mortgage Bankers Association.