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If you are a homeowner with a mortgage, you might have heard about your right to redemption. For those who have been struggling to make their house payments, this is one route that can be taken to avoid foreclosure.
What is the Right of Redemption?
If you own real estate, making mortgage payments can be hard, but foreclosure is something that most people want to avoid. The right of redemption is basically a last chance to reclaim your property in order to prevent a foreclosure from happening. If mortgagors can manage to pay off their back taxes or any liens on their property, they can save their property. Usually, real estate owners will have to pay the total amount that they owe plus any additional costs that may have accrued during the foreclosure process.
In some states, you can exercise your right to redemption after a foreclosure sale or auction on the property has already taken place, but it can end up being more expensive. If you wait until after the foreclosure sale, you will need to come up with the full amount that you already owe as well as the purchase price.
How the right of redemption works
In contrast to the right of redemption, exists the right of foreclosure, which is a lender’s ability to legally possess a property when a mortgager defaults on their payments. Generally, when you are in the process of purchasing a home, the terms of agreement will discuss the circumstances in which a foreclosure may take place. The foreclosure process can mean something different depending on what state you are in, as state laws do regulate the right of foreclosure. Before taking ownership of the property through this process, lenders must notify real estate owner and go through a specific process.
Typically, they have to provide the homeowner with a default notice, letting them know that their mortgage loan is in default due to a lack of payments. At this point, the homeowner then has an amount of time, known as a redemption period, to try to get their home back. The homeowner may have reason to believe that the lender does not have the right to a foreclosure process, in which case they have a right to fight it.
The right of redemption can be carried out in two different ways:
- You can redeem your home by paying off the full amount of the debt along with interest rates and costs related to the foreclosure before the foreclosure sale OR
- You can reimburse the new owner of the property in the full amount of the purchase price if you are redeeming after the sale date.
No matter what state you live in, you always have the right to redemption before a foreclosure sale, however there are only certain states that allow a redemption period after a foreclosure sale has already taken place.
Redemption before the foreclosure sale
It’s easy to get behind on mortgage payments, so it’s a good thing that our government believes in second chances. All homeowners have redemption rights precluding a foreclosure sale. When you exercise your right of redemption before a foreclosure sale, you will have to come up with enough money to pay off the mortgage debt. It’s important that you ask for a payoff statement from your loan servicer that will inform you of the exact amount you will need to pay in order save your property.
Redemption laws allow the debtor to redeem their property within the timeframe where the notice begins and the foreclosure sale ends. Redemption occurring before a foreclosure sale is rare, since it’s usually difficult for people to come up with such a large amount of money in such a short period of time.
The Statutory Right of Redemption after a foreclosure sale
While all states have redemption rights that allow homeowners to buy back their home before a foreclosure sale, only some states allow you to get your home back following a foreclosure sale. Known as a “statutory” right of redemption, this right as well as the amount of time given to exercise it, has come directly from statutes of individual states.
In the case of a statutory right of redemption, real estate owners have a certain amount of time following a foreclosure in which they are able to redeem their property. In order to do this, the former owner must pay the full amount of the foreclosure sale price or the full amount that is owed to the bank on top of additional charges. Statutory redemption laws allow for the homeowners to have more time to get their homes back.
Depending on what state you live in, the fees and costs of what it takes to exercise redemption may vary. In many cases during a foreclosure sale, real estate will actually sell for a price lower than the fair market value. When this happens, the former owner has a slightly higher chance of being able to redeem the home.