Cooling-Off Rule

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DEFINITION of 'Cooling-Off Rule'

A term referring to law pertaining to newly-entered contracts that allows both sides of the party a period of time (after the contract has been signed) to release themselves from any obligations without penalty.

INVESTOPEDIA EXPLAINS 'Cooling-Off Rule'

Different types of transactions will have different cooling-off rules, and not all types of contracts have such provisions. Typically this period will be three days; however, it is imperative that all the rules and regulations listed in the fine print are read before entry into a contract.

In the U.S., federal law usually requires a three-day penalty-free period for the rescission/withdrawal from any refinancing contract associated with the primary residence.

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