What happens at the end of the HELOC draw period?

At the end of the draw period (typically 10 years), you can no longer borrow against the line. Your balance enters the repayment period, where you pay principal and interest over the remaining term (typically 10-20 years). Some HELOCs allow balloon repayment; most require full amortisation. Monthly payment increases substantially because you are now paying principal in addition to interest.

RESET MECHANICS · LENDER CAPS AND PRIME RATE CHECKED SEPTEMBER 2026

HELOC Rate Mechanics: Prime, Margin, Lifetime Cap, Periodic Cap

Q: What is the lifetime cap on a HELOC?

The lifetime cap is the maximum APR a HELOC can reach over its life. Most US lenders cap at 18%, but some have lower caps and Bank of America publishes 24.00%. It is set at origination and cannot be changed. In practice, you hit this cap only in extreme rate environments. At the September 2026 prime of 7.00%, a borrower with a 3.75% margin has an APR of 10.75%, still more than 7 points below a typical 18% cap.

Q: How often does a HELOC rate reset?

Most HELOCs reset monthly, the business day after the WSJ Prime Rate changes. A minority of HELOCs reset quarterly. Your loan documents specify the reset frequency and the index (almost always WSJ Prime Rate in the US).

Q: Does my HELOC have a periodic cap?

Many HELOCs do not have periodic caps (per-reset rate movement limits), unlike adjustable-rate mortgages which are regulated to include them. Without a periodic cap, a 50bp Fed hike immediately adds 50bp to your HELOC rate at the next reset. Check your loan documents under 'Rate Changes' or 'Adjustments' to confirm whether a periodic cap applies to your specific loan.

Your HELOC rate is not mysterious. It is prime + margin, bounded by a lifetime cap, resetting monthly. Here is the math, the formula, and what to look for in your loan documents.

HELOC APR formula

HELOC APR = Prime rate + Your margin (subject to lifetime cap)

Example (September 2026): 7.00% + 2.75% = 9.75% APR

What Prime Rate Is

The Wall Street Journal Prime Rate is a benchmark representing the interest rate that banks charge their most creditworthy customers. It is defined as the federal funds target rate plus 3.00%. When the Federal Reserve moves the target rate, prime moves by the same amount the next business day.

As of 30 September 2026, the Fed funds target is 3.75-4.00%, giving a prime rate of 7.00%. Prime last moved on 17 September 2026, rising 25bp after the FOMC lifted the target range the day before. Most HELOC loan documents use the WSJ Prime Rate as the index. Verify your index in the loan agreement.

What Your Margin Is

The margin is the fixed spread your lender adds to prime. It is set at origination based on your credit score, combined loan-to-value (CLTV), and whether you have a relationship with the bank. Typical ranges:

760+ FICO, CLTV under 75%	0.50-1.50%
720-759 FICO, CLTV 75-80%	1.50-2.50%
680-719 FICO, CLTV 80-85%	2.50-3.50%
Below 680 FICO	3.50%+ or declined

Lifetime Cap and Periodic Cap

Lifetime Cap

The maximum APR your HELOC can ever reach. Typically 18% in most US states. Some states have lower statutory usury limits. Your lender may offer a lower cap as a selling point.

At prime 7.00% + 2.75% margin = 9.75% APR. The 18% cap is more than 8 points away. It only becomes relevant if prime rises above 15.25%.

Periodic Cap

The maximum rate movement at each reset period. Unlike adjustable-rate mortgages, most HELOCs do NOT have periodic caps. Without a periodic cap, a 50bp Fed hike moves your rate 50bp immediately.

Check your loan documents under “Rate Changes” or “Adjustments”. The presence or absence of a periodic cap matters most in fast-moving rate environments like 2022.

Lifetime Cap by Major Lender (September 2026)

Lender	Lifetime Cap	Periodic Cap
Bank of America	24.00% (floor 1.99%)	None (monthly reset)
Better	18.00% (floor 4.00%)	None (monthly reset)
Chase	18.00%	None (monthly reset)
US Bank	18.00% (floor 3.25%)	None (monthly reset)
Aven	Not published	Not published
Figure	Not published	Not published
SoFi	Fixed HEL; HELOC cap not published	N/A

Each cap is quoted from the lender's own disclosure, checked September 2026. Note the two surprises: Bank of America's ceiling is 24.00%, the highest of the group and six points above the 18% most lenders use, and Figure and Aven publish no lifetime cap at all, so the ceiling on those products is whatever your own agreement says. Several lenders also publish a rate floor, which matters if prime falls a long way. Caps are set at origination in your loan documents, which is the version that binds.

Draw Period to Repayment Period: Timeline

Standard 10-year draw + 20-year repayment structure. Some lenders offer 5/15 or 10/10. Check your loan terms.

Worked Example

Borrower has a $75,000 HELOC balance, prime 7.00%, margin 2.75%, lifetime cap 18%, 20-year repayment period.

Current APR

7.00% + 2.75%

9.75%

Monthly payment: interest-only

$609/mo

If prime rises 300bp

10.00% + 2.75%

12.75%

Monthly payment: interest-only

$797/mo

At lifetime cap (18%)

Cap applies

18.00%

Monthly payment: interest-only

$1,125/mo

Rate Reset Calculator

Balance ($)

Prime rate (%)

Your margin (%)

Lifetime cap (%)

Your HELOC APR

9.75%

Monthly interest-only

$609/mo

Room to cap

8.25%

Before 18% lifetime cap

What to Check in Your Loan Documents

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Rate Index

Confirm it is WSJ Prime Rate, not a private index the lender can adjust independently.

✓

Lifetime Cap

Read the exact number. 18% is standard but not universal. Some lenders cap at 21% or 25%.

✓

Periodic Cap

Most HELOCs do not have one. If yours does, confirm the maximum per-period movement.

✓

Reset Frequency

Monthly is standard. Quarterly is rarer. Affects how fast rate changes flow through.

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Draw Period End Date

Calculate month 121 from origination. This is your payment-shock date.

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Repayment Period Length

10, 15, or 20 years. Longer = lower payment shock, more total interest.

FAQ

What is the lifetime cap on a HELOC?+

Most US lenders cap at 18%, but some have lower or higher caps. Figure caps at 25%. Verify in your loan documents under 'Maximum Rate' or 'Lifetime Cap'. It is set at origination and cannot be changed.

How often does a HELOC rate reset?+

Most HELOCs reset monthly, the business day after prime changes. A minority reset quarterly. Check your loan agreement for the reset frequency.

What happens at the end of the draw period?+

You can no longer borrow. Your balance enters repayment and you pay principal + interest over the remaining term. Monthly payment increases substantially.

Does my HELOC have a periodic cap?+

Most HELOCs do not, unlike adjustable-rate mortgages. Without a periodic cap, a 50bp Fed hike immediately adds 50bp to your rate at the next reset. Check your loan documents under 'Rate Changes'.