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Home Equity Line of Credit End of Draw

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Preparing for your home equity line of credit end of draw

Your home equity line of credit (HELOC) is a form of revolving credit.  You borrow from the available equity in your home, which is used as collateral for the line of credit.  During the draw period (or borrowing period), you can access funds through the line of credit to pay for expenses. Depending on the terms, typically the draw period will be up to 10 years after which you will reach end of draw, and no longer be able to borrow against your home equity line of credit.

The information provided here is to help you understand what to expect and what your options are as you near your end of draw date.

What you need to know

It’s important to understand which type of HELOC financing you have, as this will determine your repayment method once you reach end of draw.

  • Balloon home equity line of credit: When your borrowing period ends, the balance on the account will become due.  A balloon payment, or a large lump-sum of the outstanding balance, will be required.
  • Standard home equity line of credit: When your borrowing period ends, the repayment period will begin.  You will need to make monthly payments (consisting of both principal and interest) to repay the outstanding balance.

Your minimum payments are about to change
 
If you were making minimal or interest-only payments during the borrowing period, you may notice a significant increase in your monthly payments when your repayment period begins.  You will now be responsible for paying both principal and interest each month so plan accordingly and don’t get caught off-guard by the larger payment amount.

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Options to consider

As you near or reach your end of draw, you have the following options:

  • Apply for a new home equity line of credit or other home loan. If you're approved and have an outstanding balance, you can move it to a new home equity line of credit and again borrow funds for up to 10 years to cover home improvement projects, or other necessary expenses. 
  • Start repaying your principal balance through the repayment period.
  • Pay off your balance in full, ahead of time.
  • Contact a home equity specialist if you think you’ll be unable to afford your new payment.  You may qualify for a program to help reduce your payment.

If you have questions about your account, please call and speak to one of our home equity specialists.

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