If you stop making your mortgage payments, the bank may use a process called foreclosure to sell your home and use the proceeds to repay the amount you borrowed, plus fees and costs. But even after you lose your property, you might be able to get the place back. Some states permit foreclosed homeowners to repurchase their property during what's called a "redemption period."
The right to repurchase the home is called the "statutory right of redemption" because the amount of time allowed to redeem and the right itself arises solely from state statutes. Statutory rights of redemption grant borrowers a specific amount of time after a foreclosure during which they may reclaim the property by:
Statutory redemption laws give borrowers more time to obtain funds so they can keep their homes. Also, state law sometimes gives the foreclosed borrowers the right to live in the home during the redemption period.
The right of redemption attempts to ensure that bidders at the foreclosure sale will bid a fair price. (A higher winning bid at the foreclosure sale reduces the likelihood of the former owners redeeming the property.) In reality, though, redemption statutes often chill bidding at the foreclosure sale because the purchaser must wait for the statutory redemption time to expire before officially owning the property, thereby reducing the price someone is willing to pay for the property.
The length of the statutory redemption period varies from state to state, and not all states provide one. When available, the redemption period generally ranges from thirty days to a year.
In most states that provide a post-sale redemption period, specific factors often change the redemption period's length. For example:
To find out if your state's laws provide borrowers with a post-sale right of redemption, see our Key Aspects of State Foreclosure Law: 50-State Chart.
To redeem, a foreclosed homeowner usually has to pay either:
Generally, to redeem the property after a foreclosure sale, the foreclosed homeowner must give a written notice of redemption to:
Then, the former homeowner must pay the redemption amount to the buyer, court, or another party. State law normally says what information has to go in the redemption notice and who gets the redemption money.
Most people who go through a foreclosure have trouble finding enough money to redeem their home afterward. Instead of waiting until after the sale to try to keep your home, consider applying for help beforehand. Most banks offer loss mitigation options, like modifications, to borrowers struggling to make their mortgage payments.
But you must apply for help prior to the foreclosure sale. It's a good idea to apply for a foreclosure avoidance option as early in the process as possible. Under federal mortgage servicing laws, if you submit a complete application more than 37 days before a sale, the servicer generally has to put the foreclosure on hold while evaluating your application.
To learn whether state law provides a post-sale redemption period where you live and in your situation, consider talking to a local foreclosure attorney. It's also a good idea to speak to a lawyer if you plan on redeeming your home to make sure you follow all required procedures.
If you need information about different ways to avoid a foreclosure, consider talking to a HUD-approved housing counselor.