Right Of Rescission

AAA

DEFINITION of 'Right Of Rescission'

A right under federal law set forth by the Truth in Lending Act that gives a borrower the right to cancel a home equity loan or line of credit with a new lender, or to cancel a refinance transaction done with another lender other than the current mortgagee within three days of closing. The right is provided on a no-questions-asked basis, and the lender must give up its claim to the property and refund all fees within 20 days of exercising of the right of rescission.

INVESTOPEDIA EXPLAINS 'Right Of Rescission'

The right of rescission was created to protect consumers from unscrupulous lenders, and to give borrowers a cooling off period and the time to change their minds. Not all mortgage transactions have the right of rescission. The right of rescission exists only on home-equity loans, home-equity lines of credit and refinances of existing mortgages in which the refinancing is done with a lender other than the current mortgagee. The right of rescission does not exist on a mortgage for the purchase of a home, a refinance transaction with the existing lender, a state agency mortgage, and a mortgage on a second home or investment property.

RELATED TERMS
  1. Mortgage Banker

    A company, individual or institution that originates mortgages. ...
  2. Home Equity Line Of Credit - HELOC

    A line of credit extended to a homeowner that uses the borrower's ...
  3. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  4. Home-Equity Loan

    A consumer loan secured by a second mortgage, allowing home owners ...
  5. Closing Costs

    The expenses, over and above the price of the property that buyers ...
  6. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  3. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  4. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  5. Home & Auto

    Strategic Bathroom Enhancements With Huge Returns

    Even modest investments to improve a small bathroom can yield considerable rewards.
  6. Home & Auto

    Key Home Upgrades That Make Or Break The Deal

    When making a home purchase, pay attention to key features of the home that either should meet a certain standard or should be upgraded by the seller.
  7. Entrepreneurship

    Funding A Startup When Bank Loans Aren't Possible

    There are alternative ways to fund your business start-up when it is not possible to secure a bank loan, but consider the costs and risks of each option.
  8. Home & Auto

    Universal Design Improvements That Increase Your Home's Value

    Universal design improvements yield great returns for homeowners, either through increased future comfort, or broader market appeal for their home.
  9. Investing

    Learn How To Lower Your Second Mortgage Rate

    Make a second property more affordable by taking advantage of low mortgage rates to refinance it.
  10. Credit & Loans

    Buying A Home: Cash Vs. Mortgage

    If you have the funds, should you buy your home with all cash? Here's how to decide which option – cash or mortgage – makes the most sense for you.

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center