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As your Home Equity Line of Credit (HELOC) draw period nears its end, you’re likely facing the start of repayment—or recast—period. This shift can dramatically increase your monthly payments, especially if you haven’t prepared. But here’s the good news: with the right approach, you can negotiate a HELOC draw period extension with your bank and potentially sidestep financial strain.
What Is a HELOC Draw Period and Recast Period?
A HELOC typically comes in two phases:
- Draw Period: Usually lasts 5–10 years. You can borrow against your credit line and are only required to make interest payments.
- Recast/Repayment Period: Lasts 10–20 years after the draw period. No more borrowing; you must begin repaying both principal and interest.
When the recast kicks in, many borrowers are caught off guard by significantly higher monthly payments. This is why it’s crucial to act before the draw period ends.
Can You Extend a HELOC Draw Period?
Yes, but not automatically.
Many lenders offer HELOC draw period extensions on a case-by-case basis. This process is essentially a loan modification or refinancing negotiation, where you must demonstrate:
- Good payment history
- Stable income
- Strong credit score
- Continued equity in your home
Be proactive—start this conversation at least 6 months before your draw period expires.
Ready to renegotiate your HELOC? Contact our mortgage experts today for a free consultation and personalized options.
Steps to Negotiate a HELOC Extension
1. Review Your HELOC Agreement
Read the fine print. Look for terms like “modification,” “extension,” or “renewal” clauses. Some lenders bake these in.
2. Check Your Financial Health
Your lender will evaluate:
- Your debt-to-income ratio (DTI)
- Credit score (ideally 700+)
- Consistent income source
3. Gather Supporting Documents
You’ll likely need:
- Recent pay stubs
- Tax returns
- Mortgage statements
- HELOC account history
4. Reach Out to Your Lender
Contact the bank’s mortgage or lending department. Express your desire to extend the draw period and outline your reasons—especially if your financial situation is currently tight.
5. Consider Refinancing Alternatives
If an extension isn’t granted, ask about:
- HELOC refinance
- Home equity loan
- Cash-out refinance
These alternatives might offer better interest rates or manageable terms.
Don’t wait for your HELOC to recast. Explore your refinance options now.
Risks of Not Acting Before Recast
Failing to negotiate or refinance can lead to:
- Payment Shock: Your monthly payment could double or triple.
- Credit Damage: Missed payments hurt your score.
- Foreclosure Risk: In worst-case scenarios, default could lead to foreclosure proceedings.
FAQ: HELOC Draw Period Extensions
Can I extend my HELOC more than once?
Some lenders allow multiple extensions, but they typically impose stricter conditions with each request.
How long can I extend the draw period?
Extensions range from 1–5 years, depending on your lender’s policies and your financial profile.
Will I need to requalify for the extension?
Yes. It’s similar to applying for a new loan, including credit and income checks.
Read Next
- Home Equity Loans: A Guide to Using Your Home’s Value
- What Can You Use a HELOC For? Your Questions Answered
Unsure what your next step should be? Speak with a mortgage strategist and get expert guidance tailored to your goals.
Unlock Your Home Equity with Figure
- Approval in 5 minutes. Funding in as few as 5 days
- Borrow $20K-$400K
- Consolidate debt or finance home projects
- Fastest way to turn home equity into cash
- 100% online application
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
