Draw Period

The borrowing phase of a HELOC when you can access your credit line

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Definition

The draw period is the initial phase of a HELOC — typically 5 to 10 years — during which you can borrow from your credit line as needed. During this phase, most HELOCs require only interest-only minimum payments on the amount you've drawn. This makes monthly payments low, but it means your balance isn't decreasing unless you voluntarily pay principal.

Example

You have a $70,000 HELOC at 7.5% APR in a 10-year draw period. You draw $40,000 for home renovations. Your minimum interest-only payment is $250/month ($40,000 × 0.075 / 12). After 10 years of paying only this minimum, you still owe $40,000 — your payment covered only interest, not principal. When the draw period ends, you enter the repayment period and must now pay off that $40,000.

How It's Calculated

Draw Period Interest Payment = Outstanding Balance × (Annual Rate ÷ 12). If you want to reduce your balance during the draw period, any payment above the minimum directly reduces principal. Our calculator shows the impact of paying extra during the draw period.

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Related Terms

The draw period is often the most misleading phase of a HELOC. Interest-only payments feel manageable, but they can leave borrowers with a large balance when the repayment period begins. Understanding what happens at the end of the draw period is critical to using a HELOC responsibly. Our HELOC accelerator shows how making extra payments during the draw period dramatically reduces your total cost.