As per this agreement, the borrower is willingly using the property as collateral and that the property can be retained by the lender in case the borrower fails to repay the loan. Once the document is signed, the borrower needs to abide by its terms and conditions.

In case any borrower would like to reconsider the loan agreement, he/she can accomplish that by utilizing the right to rescission act. As per this act, borrower has the right to reject or cancel a loan transaction within three business days during which he/she can decide whether to use the property as a guarantee for loan repayment or not. These three days are applicable from the date when the borrower puts his/her signature on the loan papers. Once this 3-day period expires, the funds are released by the creditor and are disbursed to the concerned parties.

“Right of rescission” is guaranteed by the Federal Truth in Lending Act.

Right of rescission is an important and mandatory part of any loan transaction. Right of rescission is applicable irrespective of any type of home including condominium, mobile home or even a house boat. However, the applicant must be the primary resident of the property. On the other hand, the right of rescission is not available on any property that is purchased or a refinanced as a second home or rental property.