What the right of rescission is
Federal law gives you a cooling-off period on certain loans secured by your primary home. During that time you can cancel the loan for any reason, without penalty. If you do, the lender must return any fees you paid and release its claim on your home.
Which loans it covers
- Refinances of your primary residence with a new lender
- Cash-out refinances on your primary residence
- Home equity loans and home equity lines of credit on your primary residence
- It generally doesn't apply to purchase loans, second homes or investment properties
- A refinance with your current lender may be covered only for any new money borrowed above your existing balance
How the three days are counted
The clock usually starts after the last of three things happens: you sign the loan, you receive the notice explaining your right to cancel, and you receive the required loan disclosures. You then have until midnight of the third business day.
For rescission, business days include Saturdays but not Sundays or federal holidays. For example, if you sign on a Thursday, the window typically runs through Friday, Saturday and Monday, and ends at midnight Monday, unless one of those days is a holiday.
How to cancel
You'll get a written notice at closing that explains how to cancel. Follow it carefully: you generally must notify the lender in writing before the deadline. Mailing, delivering or sending the notice as the form allows usually counts as long as it's sent in time. Keep a copy and proof of when you sent it.
Why your funds wait
Because you can cancel, the lender doesn't fund the new loan until the rescission period ends. That means your old loan is paid off and any cash out is sent a few days after you sign, not on closing day. If you're counting on cash-out money for a project or a bill, plan your timing around this short delay.
Rescission and your CapCenter refinance
If you refinance or take a fixed-rate home equity loan on your primary residence with CapCenter, your loan consultant and settlement agent will explain your rescission period and when your loan will fund. With ZERO Closing Costs (restrictions apply), you can focus on whether the new loan is right for you rather than on fees you'd have to recover.
