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Three Day Right To Cancel

The federal Truth and Lending Act gives you three days to reconsider a signed credit agreement and cancel the loan without penalty. This "right to rescind" or "right to cancel" is guaranteed by the Truth in Lending Act. You can cancel for any reason only if you are using your primary residence as collateral, not a vacation or second home. You have until midnight of the third business day to cancel this transaction.

There are some exceptions to this right when you are using your home for collateral:

• The loan is for building your principal residence

• When you refinance with the same creditor who holds your current mortgage and you do not borrow any additional funds

• When a state agency is the creditor for the loan

The law also provides for a waiver of this time period for personal financial emergencies, i.e. storm damage or natural disaster damage to your home, you may waive your right to the three day period to rescind. To waive your right you must submit a written statement describing the emergency and state you are waiving your right to rescind to the creditor. This statement must be signed and dated by all of those who share in ownership of the property.

You may however, want to research rights under your state and local laws for other cancellation rights in these situations.

During this waiting period the creditor cannot release the funds of the home equity loan. The three business days for rescission include Saturdays but do not include Sundays or legal public holidays.

Day one begins after all three of the following occur:

• You sign the credit contract

• You receive a Truth in Lending disclosure form containing certain key information about the credit contract including the annual percentage rate; finance charge; amount financed; and payment schedule

• You receive 2 copies of a Truth and Lending notice explaining your right to rescind.

Once you have submitted your written letter of cancellation of the loan you are no longer liable for any amount, including the finance charges and the lender must cancel its security interest in your home. The creditor then has 20 days to return all money or property paid by you as part of the transaction. They must also release any security interest in your home. You must offer to return any money or property you received from the creditor. If he doesnt claim it within 20 days you can keep it.

You may not rescind by telephone or by face-to-face conversation. If you decide to rescind you must notify the creditor in writing and this written notice must be mailed, filed by telegraphic transmission or delivered before midnight the third business day.

Remember at the time of signing your home equity loan you should receive 2 copies of the Truth in Lending notice which explains your right to rescind.