Why does the payment rise so sharply after the draw period?

Because it changes from interest only to interest plus principal. In the example the payment goes from about 354 to about 434 a month on the same balance, and the shorter the repayment period the bigger the jump.

How is this different from a home equity loan?

A home equity loan is a lump sum with a fixed payment from the start. A HELOC is a line you draw on as needed, usually at a variable rate, with the two phases shown here.

HELOC Calculator (Home Equity Line of Credit)

Your likely credit line, and both phases of payments.

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Formula

Credit line = home value × lender's limit − mortgage balance. Draw-period payment = balance × rate ÷ 12. Repayment = level payment over the repayment period

Lenders commonly set the limit by taking a percentage of the home's appraised value and subtracting what is still owed on the mortgage. While you are in the draw period many plans ask only for the interest on what you have borrowed. When it ends you can no longer borrow and the balance is repaid in level payments, which is why the monthly cost jumps.

Worked example

A $400,000 home at an 80% limit supports $320,000 of total borrowing; with $250,000 still on the mortgage, the line is about $70,000. Drawing $50,000 at 8.5% costs about $354 a month interest-only, then about $434 a month once 20-year repayment begins.

Where this can give the wrong answer

The percentage is the lender's decision. The CFPB's own illustration uses 75%; yours may be higher or lower, and your credit history and income can reduce the line further.
HELOC rates are usually variable. Both payments shown are for today's rate and will move when the rate does.
Interest-only payments repay none of the principal. After a ten-year draw period the full amount borrowed is still owed.
Some plans require the whole amount borrowed to be paid back as soon as the repayment period begins, rather than over years. Read the plan's terms; this page assumes level repayment.
The home secures the debt. In the CFPB's words, if you fall behind or can't repay on schedule, you could lose your home.

FAQ

: Because it changes from interest only to interest plus principal. In the example the payment goes from about 354 to about 434 a month on the same balance, and the shorter the repayment period the bigger the jump.

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