If we get a home equity loan and then decide it isn't right for us, what is the cooling off period I hear about, and can I stop my loan with it?
When you borrow money and pledge your home as collateral you generally have a right of rescission which is sometimes called a cooling off period. This is not the case in loans where you are purchasing or constructing the home. This period lasts for three business days after you close on your loan. You have the opportunity to tell your lender that you do not want the loan, even though you have already signed the documents for it. You may do this for any reason, but must do it in writing. The lender will explain to you how to do this at the closing. Each person who has the right to rescind the loan will be given a form with instructions.
The lender will, by law (the Truth in Lending Act and Regulation Z), reverse what has been done and you will not be charged any penalty. There will be no lien on your home either.
One reason for this part of the law was to reduce your risk when being pressured to buy new siding or storm windows from a fast talking salesman. This is a double edged sword though. Lenders will not fund loans to you during this period of rescission. This means that you will have to wait three business days from when you close your loan, until you are able to get the loan proceeds. Sometimes this is inconvenient. In rare cases you can waive your right to rescind the loan, but only for a bona-fide personal financial emergency.
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When you borrow money and pledge your home as collateral you generally have a 