HELOC Draw Period
FinancingThe draw period is the opening phase of a HELOC — commonly around 10 years — during which you can borrow, repay, and borrow again, frequently paying interest-only. This flexibility is the whole point of the line. When the draw period ends, the HELOC enters its repayment period and converts to a fully amortizing schedule (principal + interest), and the payment can jump sharply.
How it works. Because the draw period is finite, practitioners of the first-lien HELOC strategy watch the clock: they refinance the line before the draw ends — often around year 2 to 9 — to reset a fresh interest-only period and, when available, to grab a lower promotional rate (many HELOCs offer an intro rate for six months to five years before reverting to the variable Prime-based rate). Resetting keeps the flexibility and avoids being force-amortized.
The end of the draw period is the pressure point. When it hits, your payment can rise steeply just as the rate is still variable. The plan to “refinance and reset the clock” only works if you still qualify and a good rate exists — neither is guaranteed if your income has dropped or rates have risen. Decide your exit before you open the line, not in year 10.
Example. An investor takes an interest-only first-lien HELOC with a 10-year draw. In year 7 — well before it converts to the amortizing repayment period — she refinances into a new line, resetting the interest-only window and capturing a lower promo rate instead of letting the payment balloon.
Learn the full strategy in velocity banking and compare products in HELOCs & portfolio loans.