Understanding the Right of Rescission

When purchasing a home, the homebuyer can expect the transaction to be finalized at the time of settlement, or once both parties have executed all documents and the lender issues a funding authorization. However, for certain transactions, most notably refinances, the loan is not officially funded until the borrower’s right of rescission has passed. The right of rescission allows a homeowner to cancel a refinance of their primary residence, a home equity loan, or a home equity line of credit AFTER the loan has closed — but they only have a short window to do so. In fact, the homeowner has until midnight of the third business day after closing to cancel. 

How the Right of Rescission Is Determined

The rescission period begins the day you receive your notice to rescind (or right to cancel), which is one of the documents you will sign at closing. The customer then has three business days to re-evaluate what they just signed and must notify the settlement agent if they choose to cancel the transaction. Most, but not all, lenders consider Saturday to be a business day. Sundays and the following 10 federal holidays are not considered business days.

1. New Year’s Day
2. Martin Luther King Jr. Day
3. Presidents Day
4. Memorial Day
5. Independence Day
6. Labor Day
7. Columbus Day
8. Veterans Day
9. Thanksgiving Day
10. Christmas Day

Many customers who refinance their homes do so to take out cash equity to pay for home repairs, college expenses, a wedding, or to consolidate debt. If you expect to get the money immediately upon closing, it is important you understand this federally mandated delay in the funding process.

Contact the Experts at Butler Mortgage

Whether you need help understanding the rescission process or just need information about refinancing or buying a home, the team at Butler Mortgage is happy to help. At Butler Mortgage, we’ve worked with Central Florida homeowners for over 25 years — and we can help you get the loan that works best for your financial situation. If you’re interested in a free consultation, call us at 407-931-3800 or complete our free consultation form on our website.