The Right of Rescission is a protection given to borrowers under the Truth in Lending Act. This right gives borrowers of certain types of loans the opportunity to cancel their loan within 3 business days of signing the loan documents and qualify to receive a full refund of any monies paid. In your rush to refinance your home or to take out a personal loan, using your home as collateral for the loan, you may have second thoughts or want more time to shop for other financing options. This act gives you extra time to carefully consider your new loan.

Sometimes called a "cooling off" period, it allows you those 3 extra days to be certain the loan is exactly what you expected. During this waiting period, your creditor should not take any action on your transaction. For example, the creditor should not give you the money from the loan, payoff your current mortgage, or if your are dealing with a home improvement loan, the contractor should not deliver any materials or start work. The rescission period does not apply to second homes, investment properties, nor to commercial properties. The rescission period ONLY applies to one's primary residence during a cash out refinance. It does not apply for a rate and term refinance if with which the original bank carries your loan or if a state agency is the creditor for the loan.

If you do decide to exercise your Right to Rescind, you are guaranteed by Federal Law to receive back any monies you paid out for the loan. This can include the appraisal fee, application fee, and credit fee. You should receive these monies within 20 days of the lender receiving this notification. If you have not received your money back then notify the Department of Housing and Urban Development. It is possible to waive the right of rescission so you can get the money immediately, but only in emergencies. To stay out of trouble with regulators, your lender is unlikely to let you waive the right of rescission unless the loan officer is convinced that you truly have an emergency and you're not simply impatient. Examples of acceptable emergencies: your roof has blown off in a storm and you need a home equity loan right now to pay for a repair, or you need the money immediately to pay for a medical procedure.