In which mortgage transactions does the right of rescission apply and what does it allow?

• A. Applies to all loan types; no cancellation window.
• B. Applies to home equity lines of credit; allows immediate cancellation.
• C. Applies to certain refinances of a borrower's primary residence; allows three business days to cancel after closing.
• D. Applies to purchase transactions; allows 3 months to cancel.

Answer: (C)

The right of rescission is a cooling-off protection tied to loans secured by your primary residence. It specifically covers refinances or certain credit arrangements that replace your existing mortgage on that home. After you close on such a refinance, you have three business days to cancel the loan without penalty. To exercise it, you must notify the lender in writing within that window; if you cancel, the loan is void and the lender must refund any fees paid, typically within about 20 days. This period exists to give you time to review the disclosures and make sure the terms really fit your needs. It does not apply to purchase transactions, and it is not an immediate cancellation—there is a three-business-day window.