Fee that may be charged when a borrower takes an advance from a HELOC.
A draw fee is a fee that may be charged when a borrower takes an advance from a home equity line of credit.
A draw fee matters because the cost of a HELOC is not only the interest rate. Some lines may include transaction fees, annual fees, early-closure fees, or other charges that affect the real cost of using the line.
It also matters because frequent small draws can be less efficient if each draw triggers a fee.
Borrowers may see draw-fee language in HELOC disclosures, line agreements, fee schedules, or draw instructions. It becomes relevant when the borrower uses a HELOC Card, access check, transfer, or other draw method.
The term becomes practical when comparing a line with a lower rate but more transaction fees against a line with fewer access costs.
A borrower takes several small HELOC advances for a home project. If the line charges a draw fee for each advance, the borrower may pay more in fees than expected even before considering interest.
A draw fee differs from HELOC Annual Fee because the draw fee is tied to use, while the annual fee is tied to keeping the line open.
It differs from Early Closure Fee because early closure fees apply when the line is closed too soon, not when funds are drawn.
It also differs from HELOC Minimum Payment because the minimum payment is a repayment requirement, while the draw fee is a charge for accessing funds.