Closing the deal

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When you apply for a home equity loan, certain information must be provided to you. The federal Truth in Lending Act (TILA) requires lenders to disclose the following: the terms and cost of the loan including the annual percentage rate, points, fees and closing costs, the amount being borrowed, the amount owed and interest paid, special terms such as a variable interest rate, a balloon payment and a pre-payment penalty.

You will receive initial TILA disclosures at the time of application or shortly after you apply and you will receive additional TILA disclosures before you close the loan. TILA also prevents changes in the terms and conditions of the account other than the variable-rate feature.

Signing Loan Documents

Loan information will help you compare the loan offers and decide which loan is right for you. When you have decided on a loan, it is very important that you read all documents you will be signing at closing. Reading the documents just before you actually sign them is not the best way to do this. You may feel rushed and the tendency is to just glance over the paperwork. Your home is on the line and you need to understand every part of the contract.

You should ask the lender to give you copies of the actual documents you will be asked to sign. Review the documents at home with someone you trust ahead of time. Understand and feel comfortable with everything in the contract - if there is something you do not understand, ask questions until you do understand. If there are terms you do not want, don't sign the loan - negotiate or walk away.

The lender is not required to give you copies of the loan agreement ahead of time but most lenders will. If your lender does not want to give you filled in paperwork, ask for blank copies of the loan papers. Once again, the lender is not required to do this but there is no harm in asking. Even reading blank papers will let you know what to expect at signing.

Three Day Cancellation

Under the TILA, you have three days to cancel a signed home equity loan agreement for any reason. If you decide to cancel the agreement, the contract you have signed with the creditor is void - you are not liable for any amount, the hold on your home as security for the loan is released and the lender must return any fees paid within 20 days.

For the three day cancellation rule to apply to home equity loans, the loan must be taken out against your primary residence and not a second home or a vacation home. The three day cancellation rule does not apply when a state agency is the creditor for a loan.

The three day period for cancellation begins after all of the following occur:

you sign the credit contract;

you receive a Truth in Lending disclosure form containing certain key information about the credit contract, including the annual percentage rate; finance charge; amount financed; and payment schedule; and

you receive two copies of a Truth in Lending notice explaining your right to rescind

If you decide to cancel you must notify the creditor in writing and the notification must be delivered before the third business day. Business days include Saturdays but not Sundays or legal public holidays.

The three day cancellation is a waiting period for the loan and activity related to the contract cannot take place. The lender may not deliver the money for the loan. If you're dealing with a home improvement loan, the contractor may not deliver any materials or start work.

Now that you have a home equity loan.

You need to maintain very accurate records of your home equity loan. Keep a copy of any loan paperwork you signed at closing and records of all payments you have made. Make repaying your home equity loan a priority. Keep all lender billing information and dispute any inaccurate charges. If for some reason, you are going to miss a payment, don't just let it happen - contact your lender and let them know ahead of time.