Final answer:
Yes, the right to rescind a loan can apply to a transaction for a HELOC secured by a principal residence. The borrower has a three-day right to rescind the loan after closing and must notify the lender in writing within that period.
Step-by-step explanation:
Yes, the right to rescind a loan can apply to a transaction for a HELOC (Home Equity Line of Credit) secured by a principal residence. The right to rescind is a provision under the Truth in Lending Act (TILA) that allows borrowers to cancel certain types of loans within a specific period of time without penalty. For most loans secured by a principal residence, including HELOCs, the borrower has a three-day right to rescind the loan after closing.
This means that if a homeowner takes out a HELOC and later decides they don't want the loan, they have three business days to cancel the loan and have any fees or costs refunded. The borrower must notify the lender in writing of their intent to rescind the loan within the three-day period. If the borrower exercises their right to rescind, the lender must then return any money or property given as part of the loan transaction and release the security interest in the borrower's home.
It's important to note that the right to rescind does not apply to all types of loans, and there are certain exceptions and limitations. For example, the right to rescind does not apply to loans used to purchase a home or to refinance a loan with the same lender. Additionally, the right to rescind generally does not apply to loans made by finance companies, credit unions, or other non-traditional lenders.