20 Feb Refinancing? Understanding Your Right to Cancel
As a borrower, there is a substantial amount of paperwork to keep track of when refinancing. The “Notice of the Right to Cancel Escrow” is part of the final loan document package, and it is sometimes referred to as the “3-Day Notice of Cancellation” or the “rescission document.”
Borrowers will be given this document as part of their loan package, and essentially, this document provides the borrower with a provision to cancel or rescind their loan transaction within three business days of signing their loan documents.
The timeline can confuse borrowers regarding when the right to cancel applies, more specifically about the deadline to provide lender written notice of cancellation. Because this “3 Day right to cancel” is federally mandated, the loan can only fund after the time period has passed.
What types of loans have a “right to cancel” feature?
The right to cancel applies to refinances or “home equity lines of credit” that are extended on a borrower’s primary residence.
What Does The Right to Cancel Not Apply To?
On the contrary, borrowers who are purchasing a home, refinancing a second home, or purchasing an investment or rental property are not entitled to use the right to cancel.
When will my loan fund?
Loans that qualify for the rescission can fund the day after the three days have passed. This allows the settlement agent and lender to confirm that cancellation has not been received from the borrower in the allotted time period. A borrower has the right to cancel until midnight on the third banking day after signing any loan documents.
To determine the correct rescission date after signing, the borrower will count three days out, beginning with the first banking day following the signing date.
Some caveats here to be aware of are that Sundays and federal/legal holidays are not counted and are skipped. Saturdays will be counted because banks and lenders still conduct business on this day.
Additionally, there are some excellent and free “rescission calendars” available online to assist in determining the correct rescission date. Loans that do not qualify for rescission can fund soon after the loan documents are signed. Usually, the day after.
If you have any questions about this topic or need any type of escrow assistance, please contact us. Our team is here and ready to help!