Generally, there is no "out" for simply changing your mind regarding a mortgage loan, but there are some situations when a mortgage loan may be rescinded.

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Prior to Closing:
In a typical home purchase, the buyer reserves the right to rescind the contract if the buyer fails to obtain financing.  In this situation, the buyer may not be forced to honor a contract with the seller if s/he is unable to secure a loan. 

After the Closing:
The Code of Federal Regulations §226.23 provides consumers with a Three-day Right of Rescission, which applies in all 50 states.

If you’re considering applying for a personal loan and using your home to guarantee repayment, or if you are a home owner refinancing your mortgage loan, federal law gives you three days to reconsider a signed credit agreement and you may cancel the your agreement without any penalty.   As stated by the Federal Trade Commission, your "right to rescind" or "right to cancel" is guaranteed by the federal Truth In Lending Act.  If you decide to exercise your right of rescission, you must notify the creditor in writing that you are canceling the contract.  You may rescind the deal for any reason but only if you are refinancing your principal residence, or using your principal residence as collateral for your personal loan.

However, if the seller or broker has committed a fraud or made a significant misrepresentation, such as non-disclosure of major flood damage that still affects the property, you may be protected under federal law’s deceptive and unfair business practices and you should contact the Federal Trade Commission for more help.

If you are applying for a loan to buy your principal residence, or you are refinancing with the same loan creditor without borrowing additional funds, or a state agency is the creditor for your loan, you are not entitled to the three day rescission right, but you may have other cancellation rights under state or local law.

For questions regarding your options to rescind a mortgage loan, it is always in your best interests to speak with a real estate lawyer.

Get started Ask a Lawyer a Question You'll hear back in one business day.

Get started Ask a Lawyer a Question You'll hear back in one business day.