NEW YORK, May 24, 2022 (Newswire.com) - A home equity loan is a type of mortgage that allows you to borrow against your home equity for debt consolidation, home improvements, or any other reason you need. You can use the loan to pay for renovations or other expenses. But if you're wondering whether or not you can cancel your home equity loan, there are a few things you need to know.
What is a home equity loan?
A home equity loan is a type of mortgage that allows you to borrow against the value of your home. The loan is unsecured, which means that the lender doesn't require you to put up any collateral since the "collateral" is considered your home equity. You can use the money you borrow to pay for renovations, debt consolidation, or other expenses.
What are the benefits of having a home equity loan?
There are a few benefits to taking out a home equity loan. First, it can be used to pay for renovations or other expenses that you wouldn't be able to afford otherwise. Second, a home equity loan can be a great way to get started on your debt consolidation journey. Finally, a home equity loan can be an excellent way to increase your home's value if you use it to make improvements and upgrades around your property.
Can I cancel my home equity loan?
You need to know a few things before you decide whether or not you can cancel your home equity loan. Legally, canceling a home equity loan, home equity line of credit (HELOC), or mortgage is known as the "right of rescission" and was created by the Truth in Lending Act of 1968 (TILA).
After signing your contractual agreement, you should receive copies of the loan, the Truth in Lending disclosure, and two copies of a Truth in Lending notice that explains your legal rights to cancel.
TILA gives borrowers the right of rescission for three business days, including Saturdays. During these three days, you have the right to cancel your loan without any penalties or fees. After the three days are up, any penalties or fees associated with rescission will apply.
To exercise your right of rescission, you will need to submit a letter requesting the cancellation of your loan. The notice must be received by midnight on the third business day, so be sure to send your letter via registered mail if you're mailing it. Many people opt to deliver the letter in person to a physical location and get proof of receipt. If your lender is a bank, you should go to one of the customer service agents that typically sit in a cubicle instead of a teller.
What if it's after the three business days, can I still cancel?
Your ability to cancel your home equity loan after the three-day waiting period depends on your lender. Some lenders will allow cancellation up to 10 days after the three days, but will charge penalty fees and may keep your down payment or any fees you've already paid. Other lenders won't allow cancellation after the three business days, so it's critical to read your terms and conditions thoroughly before signing the agreement.
What happens after I submit my cancellation?
Once your letter of intent is received, your lender has 20 days from the date of receipt to return any money you've paid them for down payments, fees, etc. However, your lender immediately gives up the right to your home equity upon receipt of your letter.
The bottom line
A home equity loan can be a great way to finance your renovation project. However, it is essential to understand your rights and obligations before you take out the loan and ensure you know when your three-day deadline ends for your ability to cancel the loan.