Question

Buyer A closes on a house for which he borrowed $300,000 to purchase. Two days later, he changes his mind about buying the house and wants to use his right to rescind the mortgage. Can he?

Answer 1

Buyer A generally cannot rescind the mortgage after closing if it was used to purchase a new home rather than refinance an existing one, as the right to rescind primarily applies to refinance transactions on a primary residence.

Step-by-step explanation:

Under the Truth in Lending Act (TILA), a borrower has the right to rescind certain types of mortgage transactions within three days of closing, not including Sundays and public holidays. This is often referred to as the right to cancel or the right of rescission.

It applies primarily to refinance transactions on a primary residence, not to the original mortgage used to purchase the home. Therefore, if Buyer A used the mortgage to purchase a new home, rather than to refinance an existing mortgage, he generally would not have the right to rescind the mortgage after closing.

The right to rescind is intended to give consumers an opportunity to reconsider any binding agreement and to prevent hasty financial decisions, especially when dealing with complex transactions such as refinancing a mortgage.