What is the Right of Rescission?

When refinancing a loan on a primary residence, you are entitled to something called the right of rescission, or the ability to cancel the transaction. This right is set forth in the Truth in Lending Act (TILA), and expires three business days after the last of the following events occur:

• The borrower signs the closing documents;
• The delivery of all material disclosures from the lender; or
• The delivery of the required rescission notice to the borrower.

Generally, the right of rescission only applies to refinance transactions on your home, and does not apply to the following:

• Purchase money loans;
• Refinances on property that is not your principal residence;
• Loans advanced directly by a government entity; and
• Refinances by your existing lender, if the refinance is for the same amount of money owed on the existing note or less. [1]

Since there’s a possibility that you will cancel, loans that qualify for the right of rescission will only fund after the three day period has expired.

In the event that you change your mind on a qualifying loan within this period, you'll need to contact the lender. This process is found within the rescission notice that the they are required to provide. Spruce is a neutral third party serving as the title and escrow agent, and is not involved in the rescission process.

[1] 12 C.F.R. § 226.23(f)