Right of Rescission

Have you ever made a decision you later regretted, only to wish you could take it back?  Well the “right of rescission” period is a provision under the Truth and Lending Law that   essentially gives homeowners who are refinancing their mortgage a chance to think things over before committing 100% to the new loan terms.  If a homeowner decides to refinance their mortgage, once closing loan documents are signed, they will have the right to rescind for a period of three business days.  The right to rescind is essentially the “right to cancel” the mortgage transaction and have any fees refunded if they aren’t happy with the loan for any reason.

Rescission   Period is a Chance to Change your Mind

During the rescission period, the borrower has the opportunity to asses the situation and make absolutely certain they want to go through with the refinance.  At this time, they can shop mortgage rates and find something better if need be.  And most importantly, if at any time during those three days they decide they want to back out entirely, they can do so without penalty.  Perhaps you felt pressured by your bank or mortgage broker, or feel you were a victim of predatory lending.  This would be a great time to rescind the mortgage and go someplace else. 

When the Right of Rescission Period Begins

The rescission period begins at midnight the day after loan documents are signed, and ends three business days later including Saturday, but not Sundays or holidays.  At midnight on the third business day the rescission period is over, and the signed loan documents become official.  Borrowers cannot forgo the right of rescission, and must wait it out regardless of whether they like the terms or their mortgage or not.  That said, a bank or lender cannot fund the loan until the rescission period is over.  Example of right of rescission: If loan documents are signed on Monday, the rescission period begins Tuesday and ends Thursday night at midnight.  On Friday the loan would fund and record.  

There Isn’t a Rescission Period on all Mortgage Transactions

It is limited to refinances on owner-occupied properties only!  Purchase transactions do not have a rescission period.  Additionally, vacation/second homes and investment properties do not have a rescission period, even if it is a refinance transaction.

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