Can I Walk Away From a Closing on a Refinance?
- The Right of Rescission is provided in Chapter 12, Section 226.23 of the U.S. Code. It applies to offers of credit secured by the applicant's personal residence, which include refinances and home equity lines of credit, but it does not apply to credit secured for the purchase of a new home, nor does it apply if the creditor is a state agency. It also doesn't apply to readjustments of your mortgage by your current lender, unless those readjustments involve a principal balance that exceeds the one on the current mortgage, finance charges or extra fees.
- The rescission period begins either when you sign the closing papers, receive a Truth in Lending disclosure from your lender or receive a notice of your right to rescind. You must sign the latter two documents to prove that you received them. The day on which any of these events happens counts as day 1, and you have until midnight on the end of day 3 to cancel the contract. Sundays and legal holidays are excluded. During the cooling off period, the creditor can take no action on the loan and you can't receive any funds.
- You must notify the lender in writing to cancel a refinance. If you mail the written notification or send it by express courier before the expiration of the three-day period, the postmark or receipt are evidence that the notice is timely. If you deliver it manually, however, the creditor must receive it in hand before the rescission period expires. A large finance company may not route your notice to the right person in time, so it's you should call ahead so that person will be expecting it. If the company is in another city, give the notice to the agent with which you are working.
- There aren't any penalties for walking away from a refinance at any time before it closes, except for the possibility that the lender may be unwilling to negotiate another one. If you need funds quickly, you can waive the right to rescind, but you must have evidence of a bona fide financial emergency, and must declare that emergency in writing to the lender. After you have exercised your right to rescind a refinance, the lender has 20 days to return any funds or property you have supplied as part of the transaction and to release any security interest in your home.
