If you refinanced your mortgage or took out a home equity loan or HELOC in Texas, the right of rescission gives you three business days after closing to cancel the deal in writing, without penalty and without explaining yourself. Two separate laws create this cancellation right: the federal Truth in Lending Act, which applies to most loans secured by your primary home, and the Texas Constitution, which adds its own three-day cancellation window for home equity credit. The two clocks run on slightly different calendars, and both matter if you took a home equity loan.
The right also stretches to three years when the lender fails to hand you the correct paperwork, so a missed disclosure at closing can matter long after the standard window has closed.
Which Loans Qualify
Rescission applies to consumer credit where the lender takes or keeps a security interest in your principal dwelling. In practical terms, that covers mortgage refinances, home equity loans, home equity lines of credit at opening, home improvement loans secured by your home, and most reverse mortgages. It also covers situations where a lender adds your home as collateral for a debt that wasn’t previously secured by it.1eCFR. 12 CFR 1026.23 – Right of Rescission
The big exclusion is the purchase-money mortgage. A loan used to buy a home carries no rescission right, even though the lender is taking a lien on the property.2Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions Loans on vacation homes, rentals, and investment properties are also out, because the property must be where you actually live. Business-purpose loans secured by your home fall outside TILA entirely. And once a HELOC is open, individual draws against the established credit limit don’t create fresh cancellation windows, even though opening the line did.3Consumer Financial Protection Bureau. 12 CFR 1026.15 – Right of Rescission
How to Count the Three Days
Under federal law, you have until midnight of the third business day after the latest of three events: you signed the loan, you received the required TILA material disclosures, and you received the notice of your right to rescind.2Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions A “business day” for this purpose includes Saturday and excludes Sundays and federal public holidays. That surprises people.
Close on a Wednesday with all your paperwork in hand and the clock runs Thursday, Friday, Saturday, expiring at midnight Saturday. Close on a Friday and the deadline moves to Tuesday at midnight, because Sunday doesn’t count. If a federal holiday lands inside the window, skip it and the deadline pushes out one more day.1eCFR. 12 CFR 1026.23 – Right of Rescission
For a Texas home equity loan, a second clock runs at the same time. Article XVI, Section 50(a)(6)(Q)(viii) of the Texas Constitution says the owner and any spouse of the owner may rescind “within three days after the extension of credit is made.”4State of Texas. Article XVI, Section 50 – Protection of Homestead The state right runs on calendar days, extended only if the third day falls on a Sunday or federal holiday.5Cornell Law School Legal Information Institute. 7 Texas Admin Code 153.25 – Right of Rescission Texas regulators have confirmed that following the federal TILA rescission procedures satisfies the state requirement, so long as the lender delivers notice to each owner and each owner’s spouse. In most closings, the federal window is the wider of the two, but if you’re a home equity borrower, act on the shorter Texas timing to be safe.
What the Lender Has to Give You
The clock does not start until you actually have the required paperwork in hand. The lender must deliver two copies to each person entitled to rescind of a written notice, on a separate document from the loan papers, that identifies the transaction, states the lender is taking a security interest in your home, explains your cancellation right, states the deadline, and includes a form you can use to rescind.1eCFR. 12 CFR 1026.23 – Right of Rescission
The lender must also deliver TILA’s material disclosures: the annual percentage rate, the finance charge, the amount financed, the total of payments, and the payment schedule. If any of these are missing or materially inaccurate, the three-day window doesn’t start. Small errors in the finance charge are forgiven within a narrow tolerance, and any overstatement is treated as accurate. The payment schedule gets no tolerance at all, so an error there can extend the rescission period.
For a Texas home equity loan, the lender owes you one more document. A separate written notice describing your rights under the Texas Constitution, including the 80 percent loan-to-value cap, must be given at least 12 days before closing. The loan cannot close until 12 days after the later of the date you applied or the date you received that notice.4State of Texas. Article XVI, Section 50 – Protection of Homestead Missing the 12-day notice can make the entire transaction unenforceable.
How to Send Your Cancellation Notice
Rescinding means notifying the lender in writing. You can use the form the lender gave you at closing, or you can write your own letter identifying the loan and stating that you’re canceling. Mail works. So do email and fax to the lender’s designated business address.1eCFR. 12 CFR 1026.23 – Right of Rescission
The mailbox rule controls the deadline. Notice is given when you send it, not when the lender receives it. Drop a letter in the mail before midnight on the last day and you’ve met the deadline, even if the lender doesn’t open it for a week.2Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions Because a dispute may later turn on whether you sent it in time, use certified mail with a return receipt and keep a copy of the letter and the postal receipt.
You do not owe the lender a reason. A better rate elsewhere, a change of mind, cold feet the morning after signing: any of those is enough. No justification is required and none should be offered.
What Happens After You Cancel
Once your rescission notice reaches the lender, the security interest in your home becomes void and you owe nothing under the loan, including any finance charges.2Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions
The lender then has 20 calendar days to return every fee and payment you made in connection with the transaction and to take the steps needed to release the lien on your property. That includes closing costs, appraisal fees, title charges, and any other money you paid.6Consumer Financial Protection Bureau. 12 CFR 1026.23 – Right of Rescission
You go second. If the lender already disbursed loan proceeds to you, you have to give that money back, but only after the lender has met its 20-day obligation. You hold the funds until the refunds and lien release come through. Then you tender the proceeds at the lender’s designated business address. If returning the exact property is impractical, you tender its reasonable value instead. And if the lender fails to collect the tendered funds within 20 calendar days of your offer, you keep the money with no further obligation.
When the Window Stretches to Three Years
The three-day rule is the baseline. When the lender fails to deliver the required rescission notice or the material disclosures, the right to cancel does not expire at three days. It runs for three years from closing, or until you sell or transfer the property, whichever comes first.2Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions
The mistakes that trigger the three-year window are the ones a careful review of your closing packet will surface: a rescission notice with the deadline left blank, the wrong model form for the transaction, a deadline that miscounted a Sunday or federal holiday, an inaccurate payment schedule, or a finance charge understated beyond the allowed tolerance. Notice missing to a spouse who was entitled to receive it counts too, at least as to that spouse.
In 2015, the U.S. Supreme Court settled how to invoke this extended right. In Jesinoski v. Countrywide Home Loans, the Court unanimously held that a borrower needs only to send written notice to the lender within three years. Filing a lawsuit within that period is not required.7Justia US Supreme Court. Jesinoski v. Countrywide Home Loans, Inc., 574 US 259 (2015) Before that ruling, several federal appeals courts had thrown out claims when borrowers sent notice in time but sued later. That trap is now closed. Three years is a hard outer limit, though: once it passes, the right is gone regardless of what the lender did or didn’t disclose.
Spouses and Co-Owners
When more than one person has the right to rescind, any one of them can cancel on behalf of everyone. A single spouse’s letter voids the loan for both.6Consumer Financial Protection Bureau. 12 CFR 1026.23 – Right of Rescission
Texas widens the circle for home equity loans. The Texas Constitution gives the cancellation right to each owner and to any spouse of an owner, including a spouse who is not on the title and not a party to the loan.5Cornell Law School Legal Information Institute. 7 Texas Admin Code 153.25 – Right of Rescission The lender must deliver rescission notices to each owner and each owner’s spouse. If notice was never delivered to a spouse, the three-day clock never started running for that person, which can open a much later cancellation.
Waiving the Waiting Period
You can shorten or waive the three-day period only in a narrow circumstance: a genuine personal financial emergency that requires the loan to fund before the window closes. Every person entitled to rescind must sign a dated written statement that describes the emergency and specifically modifies or waives the waiting period.1eCFR. 12 CFR 1026.23 – Right of Rescission A pre-printed waiver the lender hands you at closing does not qualify. The statement must be in your own words, and the emergency has to be real and specific. Money needed to stop a foreclosure or fund an urgent home repair can meet the standard. Wanting to lock in a rate does not.
If the Lender Won’t Honor Your Cancellation
When a lender refuses to release the lien or return your money after a valid rescission, TILA lets you sue in federal or state court. The statute provides actual damages, statutory damages between $400 and $4,000 for closed-end credit secured by real property, plus reasonable attorney’s fees and court costs.8Office of the Law Revision Counsel. 15 USC 1640 – Civil Liability
Complaints can also go to the Consumer Financial Protection Bureau, which oversees TILA compliance, or to the Texas Office of Consumer Credit Commissioner, which handles state-regulated lenders and has authority over home equity lending under Texas law. An agency complaint won’t cancel your loan by itself, but it creates a record. Between the three-year extended right, the fee-shifting on attorney’s fees, and the Jesinoski rule that written notice alone preserves the claim, a lender fighting a well-documented rescission has more to lose than to gain.