Right of Rescission
The right of rescission is a federal consumer protection that gives you 3 business days to cancel certain mortgage transactions—specifically, refinances, HELOCs, and second mortgages on your primary residence—after signing loan documents. If you change your mind, you can cancel with no penalty. This right does not apply to purchase mortgages.
Established by the Truth in Lending Act (TILA), the right of rescission exists because refinancing and home equity loans involve borrowing against an existing home. Congress wanted homeowners to have a brief window to reconsider major financial decisions made under potential high-pressure sales tactics.
The 3-day clock starts on the date you sign the loan documents, receive your Truth in Lending disclosures, or receive the rescission notice—whichever is latest. 'Business days' include Saturdays but not Sundays or federal holidays. So if you close on a Thursday, your rescission period ends at midnight Tuesday (Thursday, Friday, Saturday count as days 1–3).
To rescind, you must notify the lender in writing within the rescission period. Keep a copy of your notice and send it via a method that creates a record (certified mail or email with delivery receipt). The lender must return all money paid within 20 days of receiving your rescission notice. Funds typically don't disburse until the rescission period expires, which is why refinances take 3 extra days to fund.
Key Takeaway
The right of rescission is a federal consumer protection that gives you 3 business days to cancel certain mortgage transactions—specifically, refinances, HELOCs, and second mortgages on your primary residence—after signing loan documents. If you change your mind, you can cancel with no penalty. This right does not apply to purchase mortgages.
Related Terms
Frequently Asked Questions
No. The right of rescission only applies to refinances, HELOCs, and home equity loans on your primary residence. It does not apply when you're purchasing a home—so review everything carefully before closing on a purchase.
Yes, in cases of a 'bona fide personal financial emergency.' This requires a signed, dated written statement specifically describing the emergency. Lenders cannot pressure you to waive this right.
If the lender fails to provide proper rescission notice or TILA disclosures, your right of rescission may be extended up to 3 years from the closing date. Consult a consumer protection attorney if you believe proper notice wasn't given.
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