Right of Redemption Before Foreclosure
Redemption allows you to get your home back before or after foreclosure by paying off your mortgage and other costs and fees.
A redemption period is a specific time period given to borrowers in foreclosure during which they can buy back, or “redeem,” their property. Read on to learn more about the right of redemption before foreclosure, as well as the right of redemption following foreclosure.
"Redeeming" the home can refer to either of the following situations:
- paying off the total debt, including the principal balance, plus certain additional costs and interest, before the sale in order to stop the foreclosure, or
- paying off the purchase price, plus certain costs and interest, after the foreclosure sale to reclaim the property.
In all states, the borrower can redeem the home before the foreclosure sale, but only certain states provide a redemption period following the foreclosure sale.
Redemption Before the Foreclosure Sale
One way to avoid a foreclosure is by redeeming the property prior to the foreclosure sale. This right is an equitable principal based upon the idea that borrowers should be given one last chance to keep their home, even if they have defaulted on the mortgage payments.
Cost to redeem. Generally, the borrower must pay off the entire underlying mortgage debt, plus interest and other costs (such as foreclosure fees and expenses), which are due at the time the property is redeemed.
When a borrower may redeem prior to the foreclosure sale. The borrower may redeem the property at any time between the acceleration of the underlying promissory note and the foreclosure sale.
Redemption prior to the foreclosure sale does not occur very often. In practice, borrowers do not often redeem prior to the foreclosure sale. This is because borrowers who have access to enough funds to redeem the property prior to sale usually do not fall behind in payments in the first place.
Statutory Right of Redemption
As noted above, all states allow a borrower to redeem the home before the foreclosure sale, but some states wanted to provide additional time for homeowners to save their property. To accomplish this, those states passed statutes (laws) that offer an additional amount of time to redeem the property following the foreclosure sale. This right is called a statutory right of redemption because the amount of time allowed to redeem arises solely from the state statute.
How does a statutory right of redemption work? Statutory rights of redemption grant borrowers a certain period of time after a foreclosure during which they may reclaim the property by paying the foreclosure sale price, plus certain other allowable charges.
Benefits to borrowers. Statutory redemption laws give the borrowers more time to obtain the funds needed to reclaim the home, and, in some cases, the redemption period gives the borrowers additional time to live in the property before they can be evicted.
A statutory redemption period aims to ensure a fair price at the foreclosure sale. The right of redemption attempts to ensure that bidders at the foreclosure sale will bid a fair price because a higher winning bid at the foreclosure sale reduces the likelihood of the former owner’s redeeming the property. In reality, however, redemption statutes may chill bidding at the foreclosure sale because the purchaser must wait for the statutory redemption time to expire before they officially own the property, thus reducing the price a purchaser is willing to pay for the property.
Statutory Redemption Laws Vary Between States
The length of statutory redemption period varies from state to state. The period ranges from thirty days in some states to two years in others.
Additionally, there are other factors that can change the length of the redemption period.
- The period can vary depending on whether the foreclosure is judicial or nonjudicial.
- The redemption period can be reduced under certain conditions (for example, if the property is abandoned).
- The borrower's right to redemption can be waived by the loan documents.
- If the lender pursues a deficiency judgment, this can trigger more extensive redemption rights. (For more information on deficiency judgments, see our Deficiency Judgments After Foreclosure page.)
- If the lender, rather than a third-party, is the purchaser of the property at the foreclosure sale then more extensive redemption rights may be available.
- Loans used to purchase the property may receive greater protection than other types of mortgages.
Redemption Period in Your State
To learn about the redemption period in your state, see our Summary of State Foreclosure laws page and click on your state.