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LEGAL DICTIONARY

Right of Redemption

What Is the Right of Redemption?

The right of redemption is a process that allows borrowers who have defaulted on their mortgage payments the opportunity to redeem their property by paying the full amount they owe (including interest and penalties) before or, in some cases, during the foreclosure process.

What Is the Right of Redemption in Real Estate?

The right of redemption can help people struggling with their mortgage payments retain their property. When a home buyer obtains a loan to purchase the property, they sign several legal documents. One of these documents is a promissory note. This document gives details on how the loan must be repaid.

Another key document is the mortgage (also called a deed of trust or a security instrument, depending on the state where the property is located). The mortgage specifies the procedural steps that will occur if you miss loan payments, including the lender’s right to foreclose (take ownership) on the home.

Some lenders send homeowners a notice of default after 90 days of missed mortgage payments; others might send the notice at an earlier date. Lenders typically are allowed to begin foreclosure procedures after 121 days of missed payments.

However, under the right of redemption, the borrower may reclaim the home by paying what they owe, plus interest or any additional fees.

How Does the Right of Redemption Work?

The challenge of the right of redemption is that a borrower who has fallen behind on their mortgage often needs help to come up with the money to pay their debt, and there are redemption right limitations that vary by state.

Here are some of the factors that determine the length of the redemption period in states with right of redemption laws.

  • Whether the foreclosure is judicial or non-judicial: a judicial foreclosure goes through the court system, while a non-judicial foreclosure follows state-ordained procedural steps
  • Property conditions, such as if the borrower has abandoned the property
  • Whether or not the lender is pursuing a deficiency judgment
  • If the lender, not a third party, buys the property at the foreclosure sale

Get a Free Promissory Note Form

What Are the Two Forms of Redemption?

Just as there are two forms of foreclosures, there are also two types of redemption: equitable and statutory redemption. They refer to the period when the property can be redeemed.

  • Equitable redemption is the right of a borrower to redeem the property before the foreclosure sale.
  • Statutory redemption is the right of a borrower to redeem the property after the foreclosure sale.

How to Redeem Your Home

After determining the laws governing the right of redemption in their state, a defaulting homeowner must exercise this legal right during the given time period. As we have seen, that period may be before or after a foreclosure sale of the property. The fees and penalties will vary.

In general terms, a foreclosed homeowner must do the following to redeem property after a foreclosure sale.

  • Give written notice to the purchaser of the home at the foreclosure sale
  • Give written notice to the court (or the other party) that held the foreclosure sale
  • Pay in full the redemption costs to the buyer, court, or other party

The right of redemption gives defaulting homeowners a chance to retain their homes. However, this legal right often is not exercised since people who are struggling financially typically do not have access to the funds needed to redeem their homes.

Helpful Resources:

ForeclosureLaw.org - United States Foreclosure Laws

Rocket Mortgage - Right Of Redemption In Real Estate

Cornell Law - Deficiency Judgment

What Is the Right of Redemption?

The right of redemption is a process that allows borrowers who have defaulted on their mortgage payments the opportunity to redeem their property by paying the full amount they owe (including interest and penalties) before or, in some cases, during the foreclosure process.

What Is the Right of Redemption in Real Estate?

The right of redemption can help people struggling with their mortgage payments retain their property. When a home buyer obtains a loan to purchase the property, they sign several legal documents. One of these documents is a promissory note. This document gives details on how the loan must be repaid.

Another key document is the mortgage (also called a deed of trust or a security instrument, depending on the state where the property is located). The mortgage specifies the procedural steps that will occur if you miss loan payments, including the lender’s right to foreclose (take ownership) on the home.

Some lenders send homeowners a notice of default after 90 days of missed mortgage payments; others might send the notice at an earlier date. Lenders typically are allowed to begin foreclosure procedures after 121 days of missed payments.

However, under the right of redemption, the borrower may reclaim the home by paying what they owe, plus interest or any additional fees.

How Does the Right of Redemption Work?

The challenge of the right of redemption is that a borrower who has fallen behind on their mortgage often needs help to come up with the money to pay their debt, and there are redemption right limitations that vary by state.

Here are some of the factors that determine the length of the redemption period in states with right of redemption laws.

  • Whether the foreclosure is judicial or non-judicial: a judicial foreclosure goes through the court system, while a non-judicial foreclosure follows state-ordained procedural steps
  • Property conditions, such as if the borrower has abandoned the property
  • Whether or not the lender is pursuing a deficiency judgment
  • If the lender, not a third party, buys the property at the foreclosure sale

Get a Free Promissory Note Form

What Are the Two Forms of Redemption?

Just as there are two forms of foreclosures, there are also two types of redemption: equitable and statutory redemption. They refer to the period when the property can be redeemed.

  • Equitable redemption is the right of a borrower to redeem the property before the foreclosure sale.
  • Statutory redemption is the right of a borrower to redeem the property after the foreclosure sale.

How to Redeem Your Home

After determining the laws governing the right of redemption in their state, a defaulting homeowner must exercise this legal right during the given time period. As we have seen, that period may be before or after a foreclosure sale of the property. The fees and penalties will vary.

In general terms, a foreclosed homeowner must do the following to redeem property after a foreclosure sale.

  • Give written notice to the purchaser of the home at the foreclosure sale
  • Give written notice to the court (or the other party) that held the foreclosure sale
  • Pay in full the redemption costs to the buyer, court, or other party

The right of redemption gives defaulting homeowners a chance to retain their homes. However, this legal right often is not exercised since people who are struggling financially typically do not have access to the funds needed to redeem their homes.

Helpful Resources:

ForeclosureLaw.org - United States Foreclosure Laws

Rocket Mortgage - Right Of Redemption In Real Estate

Cornell Law - Deficiency Judgment