by 
The Curious Bag
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When a borrower procures a new home equity line of credit, the deal is subject to a three-day right of rescission period. This means that the borrower can cancel the deal within three business days of signing the closing papers.
Significance
As part of the Truth in Lending Act, the three-day right of rescission allows borrowers time to think over their action and change their mind if they want. It protects borrowers from unscrupulous lenders.
Function
The three-day waiting period gives borrowers time to reconsider their options and make sure their decision was not made unwisely or hastily.
Types
A three-day right of rescission applies to two types of mortgage loans: home equity lines of credit and cash-ut refinances.
Considerations
If a borrower chooses to cancel the new debt, he must follow up with the lender to ensure that the lender has dropped the lien on the home and the debt has been fully canceled within 20 days of the closing date.
Warning
A borrower cannot use the new home equity line of credit during the three-day period, he must wait until the three days are up to begin the use of the new debt.
Source:
BankRate.com: Right of Rescission
FederalReserve.gov: What You Should Know About Home Equity Lines of Credit
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