How your home equity line of credit works

Your home equity line of credit is a revolving credit account, meaning as you pay back your balance you can continue to draw on available funds throughout the draw period. Most draw periods are either 10 or 15 years followed by a fully amortized repayment period, typically either 10 or 20 years.

Your account has a variable interest rate that is determined by a combination of the Prime Rate (which may vary) added to a margin (which does not change). During the draw period you can convert all or any portion of your line of credit balance into an installment loan with a fixed rate and fixed payments using the Fixed Rate Option.1

Whether your balance is at a variable rate or fixed rate, you will have a minimum payment due each billing cycle. Your payment may consist of the interest due and part of the principal balance or, for those who qualify, only the interest due.

What to expect at end of draw

When the draw period ends you can no longer access the line or convert a variable rate balance to a fixed rate option. You will then enter the repayment period during which you will be required to pay both interest and part of the principal balance, therefore, your payment may increase substantially.

To lessen the impact of the monthly payment change there are options to consider as you near the end of draw.

You can:

  • Apply for a new home equity line of credit or other home loan.
  • Make principal only payments in addition to your minimum monthly payment.
  • Lock in a fixed rate with a fully amortized fixed payment.
  • Pay off your balance in full, ahead of time.

End of draw FAQs