Short answer: when you get an application for a home equity line of credit, federal rules say you must also get a set of written disclosures about the plan and the CFPB home equity brochure, or a suitable substitute. If a disclosed term changes before the plan opens and you decide not to open it for that reason, all fees you paid for the application must be refunded. No one may charge a nonrefundable fee until three business days after you receive the disclosures and brochure. This page covers federal law only; other rules may apply where you live. It is general information, not legal or financial advice.
When you must get the disclosures
The disclosures and brochure must be provided when an application is given to you. They may be delivered or mailed within three business days after the lender receives your application when the application came from a magazine or other publication, or was taken by telephone or through an intermediary agent or broker (12 CFR 1026.40(b), eCFR, text up to date as of October 28, 2026, read October 30, 2026). Someone other than the lender who gives you an application must give you the brochure at that time, and the disclosures too if they have them (1026.40(c)).
The official comments add that if a lender mails you an application after a telephone request, the disclosures and brochure must come with it, and that a general purpose application does not need them unless it says it can be used for a home equity plan or you asked about one (Supplement I, comments 40(b)-1 and -2, eCFR). The brochure is What You Should Know About Home Equity Lines of Credit (1026.40(e)).
What the disclosures must say
| Item | Section |
|---|---|
| That you should keep a copy | 1026.40(d)(1) |
| The date by which you must apply to get the disclosed terms, which terms may change before the plan opens, and that you may get a refund of all application fees if a term changes and you decide not to open the plan | 1026.40(d)(2) |
| That the lender will take a security interest in your home and that you could lose it if you default | 1026.40(d)(3) |
| That under certain conditions the lender may end the plan and demand the full balance, stop further advances or reduce the credit limit, and make changes set out in the agreement | 1026.40(d)(4) |
| Payment terms: length of the draw and repayment periods, how the minimum payment is set, whether a balloon payment may result, and an example based on a $10,000 balance | 1026.40(d)(5) |
| For a fixed rate, a recent annual percentage rate and that it does not include costs other than interest | 1026.40(d)(6) |
| An itemization of the lender’s fees to open, use or keep the plan, and a good faith estimate of third-party fees to open it | 1026.40(d)(7)-(8) |
| Whether negative amortization may occur | 1026.40(d)(9) |
| Limits on the number or amount of draws, and any minimum balance or minimum draw | 1026.40(d)(10) |
| That you should ask a tax advisor about deducting interest and charges | 1026.40(d)(11) |
| For a variable rate: the index and how the rate is set, any discounted first rate and how long it lasts, the frequency of rate changes, caps and the maximum rate, the payment at the maximum rate for a $10,000 balance, and a 15-year historical example | 1026.40(d)(12) |
Your right to a refund of fees
A lender must refund all fees you paid to anyone in connection with the application if a term that had to be disclosed changes before the plan is opened and, as a result, you decide not to open it. A rate change caused only by movement of the index in a variable-rate plan does not count (1026.40(g)). The official comments say this covers fees such as credit report and appraisal fees, whether paid to the lender or to someone else, and that a term given as a range does not change if the final term falls within the range (comments 40(g)-1 and -3).
This example is only for the math, with example fees and terms, not figures for any lender.
| Item | Example |
|---|---|
| Disclosed rate cap | 5 percentage points over the first rate |
| Rate cap in the final agreement | 6 percentage points over the first rate |
| Application fee | $100 |
| Appraisal fee | $450 |
| Credit report fee | $50 |
| Refund due if you decline because of the change: $100 + $450 + $50 | $600 |
The official comments use this kind of cap change as an example of a change that permits a refund (comment 40(g)-3).
The wait before a nonrefundable fee
Neither the lender nor anyone else may charge a nonrefundable fee in connection with the application until three business days after you receive the disclosures and brochure. If they are mailed, you are considered to have received them three business days after mailing (1026.40(h)). The official comments say a fee collected inside that window must be refunded if you decide within three days not to go ahead, that you must be told in writing that it is refundable, and that for mailed disclosures this works out to six business days after mailing (comment 40(h)-1).
What a lender may not change later
A lender may change the rate only based on an index outside its control that is available to the public, may end the plan and demand the full balance only in listed cases such as fraud, failure to meet repayment terms, or action that harms its security, and may not change other terms except as the rule allows (1026.40(f)(1)-(3)). These limits also apply to anyone who later holds the plan (comment 40(f)-1). For when a lender may freeze or reduce the line, see HELOC credit line freeze.
After you open the line
If the line is secured by your principal dwelling, you may have a right to cancel within three business days; see right to cancel a home equity loan. To compare a line of credit with other ways to borrow, see HELOC vs personal loan and the CFPB HELOC answer. You can submit a complaint at consumerfinance.gov/complaint.
Questions to ask the lender
- Which disclosed terms are subject to change before the line opens, and by what date must I apply to keep them?
- Which fees are refundable, and until when?
- What index and margin set the rate, and what is the maximum rate?
- Will the minimum payment pay off the balance, or could there be a balloon payment?
- Under what conditions can you freeze or reduce my line?
Checklist
- Get the disclosures and the home equity brochure with the application.
- Keep a copy of the disclosures.
- Compare the final terms with the disclosed ones before you open the line.
- Ask for a refund of all application fees if a term changed and you decline.
- Do not pay a nonrefundable fee before the three-business-day wait ends.
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Sources
- eCFR: 12 CFR 1026.40, Requirements for home equity plans (Regulation Z), current text up to date as of October 28, 2026
- eCFR: Supplement I to Part 1026, Official Interpretations (Regulation Z), current text up to date as of October 28, 2026
- CFPB: What You Should Know About Home Equity Lines of Credit (booklet)
- CFPB: What is a home equity line of credit (HELOC)?
- CFPB: Submit a complaint
Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.