Understanding The Right Of Redemption In Real Estate

Aug 29, 2023

5-minute read

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If you fail to make your mortgage payments on time, your lender could take possession of your home through the foreclosure process. But there is a legal tool that homeowners can rely on to save their homes even after a foreclosure action is completed: The right of redemption.

The right of redemption allows homeowners to keep their homes if they pay back what they owe even after their lender starts the foreclosure process or puts the home up for sale at public auction. In some states, the right of redemption allows delinquent homeowners to pay what they owe and get their residences back even if their lenders have already sold the home to another buyer.

How can the right of redemption help you if you’re struggling with your mortgage payments? Here’s a look at how this legal process works.

What Is The Right Of Redemption?

When you get a loan to finance the purchase of a home, you'll sign some key papers. One document is a promissory note. This spells out how you'll repay your mortgage, usually in regular monthly payments.

You'll also sign a document called either a mortgage, deed of trust or a security instrument depending on the state in which the home sits. This document states what happens if you don't make your mortgage payments and states that lenders have the right to foreclose on your home if you default on your loan.

Foreclosure is how lenders, if they are the top bidders, take ownership of homes when their owners stop making mortgage payments. Some lenders will send homeowners a notice of default if they miss 90 days of mortgage payments, while others might send notice earlier. On day 121, lenders are typically allowed to begin foreclosure procedures.

During the 90-day period before lenders offer up a home at auction, the owners of the property can reclaim their home through a reinstatement. If the owners repay their debts, plus any additional fees or interest payments charged by their lenders, they can reclaim possession of their home and their lender won’t sell the property at auction.

The challenge here is that most homeowners can’t come up with the cash to pay back what they owe before their homes hit a public auction. Owners who fall behind on their mortgage payments are usually facing financial struggles. Those same struggles mean that they often can’t afford to exercise the right of redemption to save their home from foreclosure.

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