Adjusting a Home Equity Loan Cancellation: A Guide
Home equity loans are a type of debt that allows homeowners to borrow against their home's equity. Upon approval, your lender will send you a credit agreement to sign and return. You have three precious days to reconsider this decision and back out without any repercussions.
During these three days, if you decide to cancel, your lender must relinquish their claim on your property and return all fees they've charged. This right is federally protected and is essentially a cooling-off period that allows you to change your mind.
The three-day period starts when you sign the loan agreement, receive a Truth in Lending Act (TILA) disclosure, and get two copies of the TILA notice. This notice explains your right to cancel and the consequences of doing so. You have until midnight of the third day, excluding Sundays and holidays, to inform your lender about your decision to cancel.
It's important to note that not all mortgage transactions have this cooling-off period. This right to cancel exists only on home equity loans, home equity lines of credit (HELOCs), and refinances of existing mortgages if the refinancing is done with a lender other than the current mortgagee. However, it doesn't apply to vacation homes or second homes.
If you decide to cancel within the three days, your home is no longer collateral, and your lender can't use it to pay off the loan. They must return all fees, including appraisal and title search fees, that they've charged. If you received money or property from the mortgage lender, you can keep it until the lender shows that your home is no longer being used as collateral and returns any money you've paid.
Be cautious when determining the end of your cancellation period. You must receive the TILA disclosure and two copies of the TILA notice for the countdown to begin. Lenders can't take any action on the loan until the three-day waiting period has passed. This means they can't send you the money or provide services. If you're using the loan for home improvements, you can't pay contractors or start work until after the period has passed.
To cancel a home equity loan or HELOC, you must inform your lender in writing. You must deliver or mail your written notice before midnight on the third day, and you can't cancel by phone or in person. If you mail the written notice, ensure that you send it via registered mail so that you have a record of when you mailed it.
Remember, mortgage lending discrimination is illegal. If you believe you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, you can file a report with either the Consumer Financial Protection Bureau (CFPB) or the U.S. Department of Housing and Urban Development (HUD).
There are some exceptions to the three-day cancellation rule. For example, the rule doesn't apply if you apply for a loan to buy or build your primary residence or if you refinance your mortgage with the same lender who holds your loan and don't borrow additional funds. However, if you borrow additional money, the rule applies, and you can cancel the loan.
If you cancel a home equity loan within the three days, your lender must give up their claim on your property and return any money you've paid them. They have 20 days to do this.
In some cases, you may need to waive your right to cancel if you require the funds immediately, such as in an emergency. To do this, you must give the lender a written statement describing the emergency and stating that you're waiving your right to cancel. This statement must be dated and signed by you and any other person who also owns the home.
So there you have it – your straightforward guide to cancelling a home equity loan. Remember, knowledge is power, and understanding your rights can save you a world of hassle down the line.
In the realm of personal-finance, if you decide to cancel a home equity loan within the initial three days, your lender is obligated to give up their claim on your property and return any fees they've charged, including appraisal and title search fees. Keep in mind that this right is only applicable to home equity loans, home equity lines of credit (HELOCs), and refinances of existing mortgages, provided the refinancing is not conducted with the current mortgagee. However, there may be exceptions, such as when the loan is applied for to buy or build your primary residence or if you refinance your mortgage with the same lender without borrowing additional funds. In emergencies, you might waive your right to cancel by providing a written statement describing the situation and stating that you're voluntarily forgoing this option.
