Right Of Rescission


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.

BREAKING DOWN '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.

  1. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  2. Mortgage Banker

    A company, individual or institution that originates mortgages. ...
  3. Home-Equity Loan

    A consumer loan secured by a second mortgage, allowing home owners ...
  4. Rescission

    The right of an individual involved in a contract to return to ...
  5. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
  6. Closing Costs

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