Mortgage contracts are legally binding documents--both a lender and a borrower are required to abide by the terms set forth in the document. Cancelling a mortgage agreement can only occur within 72 hours of the closing. This is called the rescission period. Cancelling, or rescinding, the mortgage agreement using this process is quite simple. You must be sure you want to cancel, as this will erase the entire history of underwriting.
Review the final paperwork you signed at closing. All documents pertaining to the loan will be contained in this package. Look specifically at the mortgage note, which breaks down the rate, term, and payment. Once you cancel a mortgage, you potentially lose the rate and payment for a future loan. You must be sure.
Find the Right of Rescission in your paperwork. This document clearly states your intent to cancel the mortgage contract. It must be signed within 72 hours of the closing. (This does not include Sundays or national holidays). All vested owners on the property must sign and date this document.
Bring this document to your lender within 72 hours. As soon as the lender receives this notice, both signed and dated, he must immediately cancel the mortgage loan. He cannot resolicit the loan or attempt to change any of its terms. Ask for a Release of Mortgage. (Most lenders record mortgages before the rescission period is up.)
Visit the Registry of Deeds in your town a week later. Make sure the mortgage, if it was recorded, was released immediately after you signed the rescission notice.
If you are outside the rescission period, but are a victim of mortgage fraud, you'll need to contact your state Attorney General to cancel your mortgage contract. Do not stop paying as this will negatively affect your credit.
Tips and warnings
- If you are outside the rescission period, but are a victim of mortgage fraud, you'll need to contact your state Attorney General to cancel your mortgage contract. Do not stop paying as this will negatively affect your credit.