TILA and Regulation Z on a second home: consumer credit, but no three-day right to cancel
A second home you use more than 14 days a year is a consumer loan with full Reg Z disclosures, but the rescission right, HPML rules and ARM adjustment notices are reserved for your principal dwelling.
Why a vacation home is still consumer credit
Regulation Z exempts business-purpose credit, and its commentary draws the line at occupancy: a loan to buy rental property that is not owner-occupied is deemed business purpose, while “owner-occupied” means the owner expects to occupy the property for more than 14 days in the coming year. A beach condo you use three weeks each summer therefore sits on the consumer side, and the lender owes you the full set of disclosures — APR, finance charge, the Loan Estimate and Closing Disclosure, periodic statements, payoff statements within seven business days, and the ability-to-repay analysis. A unit you will never stay in and rent year-round is a different animal: it may be written as business-purpose credit and lose these protections, which is one reason a lender asking a vacation buyer to sign a “business purpose” affidavit deserves a second look.
Rescission stops at the principal dwelling
The three-business-day right to cancel exists only when the lender takes a security interest in your principal dwelling, and even then not on a purchase loan. So the map looks like this. Refinancing or taking a HELOC against your main house: you may rescind until midnight of the third business day after closing (for this purpose, business days are every day except Sundays and federal holidays), and funds are held until the window closes. Refinancing the vacation condo: no rescission, the loan funds at the table. Using a HELOC on your primary residence to raise the 10% down payment for the second home: that HELOC is rescindable, so plan the timeline — the cash is not available on closing day. You can have only one principal dwelling at a time; a property you intend to move into within a year counts as principal from the start.
Other Reg Z provisions keyed to where you live
Higher-priced mortgage loan rules — the mandatory escrow account and the extra appraisal requirements — apply to the principal dwelling only, as do the HOEPA high-cost triggers and the rate-adjustment notices on adjustable loans (the 210-to-240-day first-adjustment notice and the 60-day notices afterward). A second-home ARM may still get those notices by servicer policy, but federal law does not require them, so put the adjustment dates in your own calendar. What does reach a second home regardless: the ATR rule, periodic statements, prompt crediting of payments, loan originator compensation limits, and the TRID timelines.
The condo line items the disclosures do and do not capture
HOA dues appear on page 1 of the Loan Estimate as an estimated assessment that is not escrowed, but they are not part of the finance charge or the APR, so two condos with identical APRs can cost very different amounts each month. The master insurance policy is buried in the dues; your own HO-6 premium is shown as property insurance. Neither a special assessment nor a future dues increase is reflected anywhere, which is why the association’s budget matters more than the APR when comparing units.
What to check
- Confirm the loan is written as consumer-purpose credit if you will occupy the property more than 14 days a year; refuse a business-purpose affidavit that does not match your use.
- Do not count on a rescission period on a second-home refinance; if you fund the down payment with a HELOC on your primary residence, build the three-day wait into the closing schedule.
- On a second-home ARM, note the adjustment dates yourself — the Reg Z rate-change notices are only mandatory for a principal dwelling.
- Compare condos on payment including HOA dues, not on APR, since dues sit outside the finance charge.
Frequently asked questions
Do I get three days to cancel a refinance on my vacation condo?
No. Rescission under Regulation Z applies only to non-purchase loans secured by your principal dwelling. A refinance or home equity loan on a second home closes and funds without a cancellation window. The same refinance on your main residence would carry the three-business-day right, during which the lender must hold the funds.
Does Regulation Z protect a second home I also rent on Airbnb?
Generally yes, if you personally occupy it more than 14 days in the coming year, because the commentary treats owner-occupied one-unit property as consumer credit. If you will not stay there at all and it is rented out, the loan may be classified as business-purpose and fall outside TILA. Be accurate about your intended use; the classification follows the facts.
The rule in full: Truth in Lending Act (TILA) and Regulation Z. The borrower profile: Condo and second-home buyers. Related guides: Conventional loans for condos and second homes: the extra rules · PMI removal: the 80% request, the 78% automatic cancellation, and the appraisal route · Closing costs explained: what is negotiable, what is not · ARM vs fixed-rate mortgage: when an adjustable rate makes sense.
Other federal rules for condo and second-home buyers
RESPA · TRID disclosures · ECOA · Fair Housing Act · HMDA · SAFE Act / NMLS · ATR / QM · HOEPA · HPA / PMI · Servicing rules · FCRA · Flood insurance · MARS rule · SCRA · LO compensation
TILA / Reg Z for other borrowers
First-time buyers · Conventional borrowers · Veterans · Self-employed · Investors · Retirees · Bad credit · Foreign nationals · Physicians · Heroes · Rural buyers · Refinancing