HELOC Repayment Terms
As with other lines of credit, HELOCs need to be repaid on a regular basis, usually monthly. Borrowers get a statement with a minimum payment and a total balance. Paying the minimum is all it takes to continue using the line of credit without penalty, but interest will be charged on the remaining amount owed.
HELOCs do have payback terms or a specific length of time that the line of credit can be used. Again, this depends on the lender. Some banks offer longer terms while others prefer HELOCs to be paid back in full over a shorter period of time.
They also differ from most other home financing methods because they work as a line of credit for a certain length of time before converting to a standard home equity loan. During the LOC period that typically ranges from five to 10 years, you can draw out money up to the credit limit, repay it and then borrow it again.
Once this draw period ends and the HELOC transitions to a regular loan, you have 10 to 20 years to repay the outstanding balance via monthly payments. The variable interest rate charged on most HELOCs is easy to manage during the draw period, but it can be more difficult to budget for once the repayment phase begins. At that time, you have the option of refinancing to a conventional mortgage or reapplying for a new HELOC.
Some HELOCs also have additional fees for paying the balance in full before the line of credit converts to a standard loan. Sun Trust, for example, requires a borrower to pay closing costs if their loan is paid off early.