The TILA right of rescission three-day rule gives you three business days to cancel certain loans secured by your primary home, with no penalty and no need to explain yourself. It applies to home equity loans, home equity lines of credit, and most refinances. It does not apply to the mortgage you used to buy the home.1Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions If your lender skips required paperwork, that window can stretch to three years.
Which Loans the Rule Covers
The right kicks in whenever a lender takes a security interest in the property you use as your primary residence as part of a consumer credit transaction. Home equity loans, HELOCs, and refinances where you switch lenders or your current lender advances new money beyond the existing balance all qualify.1Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions
“Primary home” is read broadly. Condos, co-op units, and mobile homes count as long as you actually live there. You can only have one principal dwelling at a time, so vacation homes and investment properties are out.2Consumer Financial Protection Bureau. Regulation Z 1026.2 – Definitions and Rules of Construction A home you are building or buying that will become your principal dwelling within a year also qualifies.
Several loans are carved out even though your home secures them:
- Purchase-money mortgages, meaning the loan used to buy or build the home.
- Refinances with the same creditor where no new money is advanced beyond the current balance and accrued charges.
- Loans where a state agency is the creditor.
- Advances drawn on a HELOC that was already established, since the security interest already exists.
These exclusions come from the statute itself, so a lender cannot restore the right by agreement.1Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions
When the Three Days Start
The window does not begin automatically at closing. It runs until midnight of the third business day after the latest of three events: consummation of the loan (when you become contractually obligated, usually at signing), delivery of the Notice of Right to Cancel, and delivery of the material disclosures.1Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions At most closings, all three happen the same day. If disclosures arrive late, the clock resets to the later date.
Two copies of the Notice of Right to Cancel must go to each person with an ownership interest in the property. If two spouses co-own the house but only one is borrowing, both still receive the notice.3eCFR. 12 CFR 1026.23 – Right of Rescission The material disclosures cover the loan’s core financial terms: the annual percentage rate, the finance charge, the amount financed, the total of payments, and the payment schedule.4eCFR. 12 CFR 1026.23 – Right of Rescission
Counting the Days
For rescission, “business day” means every calendar day except Sundays and the federal holidays listed in 5 U.S.C. ยง 6103(a): New Year’s Day, Martin Luther King Jr.’s Birthday, Washington’s Birthday, Memorial Day, Juneteenth, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving, and Christmas.5eCFR. 12 CFR 1026.2 – Definitions and Rules of Construction Saturdays count. This catches many borrowers off guard.
A quick example. Close on Monday and get all your disclosures the same day: Day 1 is Tuesday, Day 2 Wednesday, deadline midnight Thursday. Close on Friday: Saturday is Day 1, Sunday is skipped, Monday is Day 2, deadline midnight Tuesday. A federal holiday in the window pushes the deadline forward by one day.
How to Cancel
Cancellation has to be in writing. A phone call or an in-person statement does not count.3eCFR. 12 CFR 1026.23 – Right of Rescission You do not have to give a reason or use any particular wording. A clear written statement that you are canceling is enough. The Notice of Right to Cancel your lender handed you at closing typically includes a form you can sign and return, but any written notice works.
What matters is the send date, not the receive date. If the notice is placed in the mail, handed to a delivery service, or transmitted electronically before midnight of the third business day, you are protected. Most borrowers use certified mail with return receipt for proof.
If more than one person has the right to rescind, any one of them can cancel for everyone. A single co-owner’s notice binds all of you, and the lender cannot refuse to honor it on the grounds that only one signature appears.3eCFR. 12 CFR 1026.23 – Right of Rescission
What Happens After You Rescind
Once a valid rescission notice is delivered, the lien on your home is automatically void and you owe nothing in finance charges or other fees connected to the transaction.1Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions The unwinding then runs in a specific order.
Within 20 days of receiving your notice, the lender must return every dollar you paid in connection with the loan, including application fees, appraisal costs, and prepaid interest. The lender must also release the lien on your home and clear the security interest from public records.1Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions
Only after the lender meets those obligations do you have to return the loan proceeds. You can make the funds available at your home rather than deliver them to the lender’s office. If the lender fails to take possession of tendered property within 20 days after you make it available, ownership vests in you with no obligation to pay. That remedy exists to keep lenders from stalling.
When the Window Stretches to Three Years
If the lender never delivers the Notice of Right to Cancel or omits any of the required material disclosures, the three-day clock never starts. Your right to rescind then extends up to three years from the date the loan closed, or until you sell the property, whichever comes first.1Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions
The three-year cutoff is a hard deadline, but reaching it is easier than lenders long argued. In Jesinoski v. Countrywide Home Loans, the Supreme Court held that a borrower only has to send written notice of rescission within the three-year period. Filing a lawsuit within three years is not required; mailing the letter is enough.6Justia US Supreme Court. Jesinoski v. Countrywide Home Loans Inc., 574 US 259 (2015)
One narrow exception stretches the cutoff further: if a federal enforcement agency opens proceedings within the three-year period and finds a violation, the borrower’s right can run up to one year after that proceeding ends.1Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions Outside that scenario, no court can extend the deadline.
Waiving the Right in an Emergency
If you need the loan funds immediately and cannot wait out the three days, federal law lets you waive the right, but only on strict terms.3eCFR. 12 CFR 1026.23 – Right of Rescission You must give the lender a dated, handwritten statement describing a genuine personal financial emergency, specifically stating that you are modifying or waiving the rescission right, and signed by every person entitled to rescind. Pre-printed forms do not satisfy the rule. If your lender hands you a prepared waiver to sign, it is invalid.
If the Lender Violates the Rule
A lender that violates TILA’s rescission requirements faces liability beyond unwinding the loan. A borrower can recover actual damages plus statutory damages, which run from $400 to $4,000 per violation for a closed-end loan secured by a dwelling. A successful borrower also recovers court costs and reasonable attorney’s fees, which often exceed the statutory damages themselves and are what make these cases viable against large lenders.7Office of the Law Revision Counsel. 15 USC 1640 – Civil Liability