What is the Right of Rescission?

The right of rescission is a federal law that gives homeowners the right to cancel certain types of home loans within a specific period of time after signing the loan documents. The right of rescission is also known as the “cooling-off period”. This law is designed to protect homeowners from predatory lending practices.

When Does the Right of Rescission Apply?

The right of rescission applies to certain types of home loans, including refinance loans and home equity loans. It does not apply to first mortgages or loans used to purchase a home. The right of rescission applies to loans secured by your primary residence, but not to loans secured by a second home or investment property.

How Long is the Right of Rescission Period?

The right of rescission period is three business days. This means that you have three business days from the date that you sign the loan documents to cancel the loan. If you decide to cancel the loan, you must notify the lender in writing before the end of the third business day.

What Happens if I Cancel the Loan?

If you cancel the loan within the right of rescission period, you are not responsible for any fees or charges associated with the loan. The lender must return any money that you have paid, including any down payment or closing costs. The lender must also release any liens that were placed on your property as a result of the loan.

How Do I Calculate the Right of Rescission Period?

The right of rescission period begins on the day that you sign the loan documents. Saturdays, Sundays, and federal holidays are not considered business days. The right of rescission period ends at midnight on the third business day after you sign the loan documents.

What Should I Do if I Want to Cancel the Loan?

If you want to cancel the loan within the right of rescission period, you should notify the lender in writing. You can use the form provided by the lender, or you can write a letter stating that you are cancelling the loan. Be sure to keep a copy of the letter for your records.

What Happens if I Miss the Right of Rescission Period?

If you miss the right of rescission period, you may still be able to cancel the loan, but you will not be protected by federal law. You will need to check your loan documents to see if there is a provision for cancelling the loan after the right of rescission period has expired. If there is no provision for cancelling the loan, you will be responsible for repaying the loan according to the terms of the loan agreement.

Conclusion

The right of rescission is an important protection for homeowners who are considering certain types of home loans. If you are thinking about refinancing your home or taking out a home equity loan, be sure to understand your rights under the right of rescission law. If you decide to cancel the loan, be sure to do so within the right of rescission period to avoid any fees or charges associated with the loan.