How a HELOC works
When you take advantage of a HELOC, you are required to make a minimum monthly payment that covers the interest. But you can also pay down the principal so that your debts are cleared and you can withdraw funds again if the draw period isn't over.
Once the draw period ends, you can ask for a renewal or you can no longer access the cash once the draw period expires. The repayment period starts once the draw period has expired and the HELOC takes the form of an adjustable rate mortgage (ARM) that requires you to pay down the loan in regular installments.
In most cases, you have a draw period of 5 to 10 years, after which the repayment period is typically 10 to 15 years. There are lenders who offer HELOCs with no fixed terms for withdrawal and repayment of loan; you can carry on with the loan until you sell the property.
Here's an example on how a HELOC works:
Suppose you have a line of credit of $10,000.
You borrow $6,000 in order to pay for a kitchen remodel.
You owe the $6,000 you've already taken and the remaining credit available is $4,000.
If you pay back $2,000, you still owe $4,000.
So, you have $6,000 ($4,000 + $2,000 = $6,000) in available credit.