A redemption period is a specific time period given to borrowers in foreclosure during which they can pay off the debt and “redeem” their property. All states allow a borrower to redeem the property before a foreclosure sale. Some states also provide foreclosed borrowers with a redemption period after the foreclosure sale during which they can buy back the home.
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:
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.
One way to avoid a foreclosure is by redeeming the property prior to the foreclosure sale. This right is an equitable principle based upon the idea that borrowers should be given one last chance to keep their home, even if they have defaulted on mortgage payments.
Cost to redeem. Generally, the borrower must pay off the entire underlying mortgage debt, plus interest and other costs, like foreclosure fees and expenses, which are due at the time the property is redeemed. To do this, you must first find out the exact amount needed to satisfy the debt by requesting a payoff quote, which is also sometimes called a payoff letter or payoff statement, from the servicer. (Learn more about the process for paying off a mortgage loan before a foreclosure sale.)
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 don't fall behind in payments in the first place.
Again, all states allow a borrower to redeem the home before the foreclosure sale. Some states, though, have passed 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 after the sale arises solely from the state statute.
(Read more about the statutory right of redemption and find out whether you have the right to buy your home back after a foreclosure sale).