How do you draw money from a HELOC?

Most HELOCs work like a checking account linked to your loan.

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Tips

• Draw when a bill is due, not before; interest starts on the draw date.
• Pay contractors from the line directly to keep a clean record for taxes.
• Set alerts for every draw.

When interest starts

Interest accrues from the day funds leave the line. A transfer drawn on the 25th of the month costs only a few days of interest in that billing cycle. How interest is calculated.

Draw methods compared

The first draw

Some lenders require an initial draw at closing, often a set dollar amount or a percentage of the line. Others fund most of the line at closing and let you redraw as you repay. Ask which kind of line you're getting.

Keeping track

If any of the money improves your home, keep a record of each draw and what it paid for. It matters if you want to deduct the interest. Tax rules.

Draw limits and the draw period

You can draw up to your available credit at any time during the draw period, usually 10 years. When the draw period ends, you can't draw anymore, even if you've paid the balance down. End of the draw period.

Related question: HELOC fraud warning signs

Questions people ask

Can you draw from a HELOC before the 3-business-day right to cancel ends?

No. On a primary home, HELOC funds become available only after the 3-business-day right to cancel, or rescission period, ends. Many lenders then let you draw immediately by transfer.

Is there a fee to draw from a HELOC?

Usually not. Most lenders charge no fee to draw from a HELOC, but some charge for checks or cards, and some set minimum check amounts. Check your agreement for the details.

Example

A homeowner pays a contractor $15,000 by online transfer from the HELOC to checking, then writes a check. Two weeks later she pays the cabinet supplier directly with a HELOC check. Both draws show on the next statement with interest from the day each posted.

Mistakes to avoid

• Drawing before you need the money.
• Mixing draws for different purposes without records.
• Using a HELOC card for everyday spending.

Also asked

How quickly can you get HELOC money after closing?

Usually right after the 3-business-day right to cancel on a primary home, when many lenders let you draw from the HELOC immediately by transfer. Checks and cards may take a week or two to arrive.

Can someone else draw from your HELOC?

Only borrowers on the HELOC account can draw from the line. Some lenders let you add an authorized user to a HELOC card, but be careful, since you're responsible for what they draw.

Is there a daily draw limit on a HELOC?

Often, for online transfers. Many HELOC lenders set daily limits on online transfers, so for a large draw, ask the lender for a wire or branch transfer instead.

Can I transfer HELOC funds to another bank?

Yes, by online transfer to a linked account, though some lenders limit transfers to accounts in your name.

Do HELOC checks expire?

No, HELOC checks themselves don't expire, but you can't use them after the draw period ends, usually after 10 years. After that, you can't draw at all, even if you've paid the balance down.

Can you draw from a HELOC to make your mortgage payment?

Technically yes, but borrowing to pay your mortgage is a warning sign that your budget isn't working. If income has dropped, talk to your mortgage servicer about a repayment plan or forbearance, and to a HUD-approved housing counselor.

More in HELOC guides

• What is a HELOC?
• HELOC requirements
• When the draw period ends
• How HELOC interest is calculated
• HELOC pros and cons
• Is a HELOC a bad idea?
• How to get a HELOC
• Does a HELOC show on your credit report?

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