Right of Redemption Definition and How to Exercise the Right
Right of Redemption Definition and How to Exercise the Right
What Is Right of Redemption?
The right of redemption allows individuals who have defaulted on their mortgages to reclaim their property by paying the amount due (plus interest and penalties) before or after a foreclosure sale.
Key Takeaways
– Right of redemption is a legal process that allows delinquent mortgage borrowers to reclaim their property subject to foreclosure.
– This right can be exercised even if the lender has already re-sold the property, as long as it is within the redemption time frame and all conditions are met.
– A successful redemption will also require the borrower to repay any costs incurred as a result of the foreclosure process.
Understanding Right of Redemption
When an individual obtains a mortgage, their home serves as collateral. Defaulting on payments results in the loss of ownership. Mortgage notes include the right of foreclosure, giving lenders the ability to take possession of the property. Lenders must follow specific procedures, providing a default notice to the borrower and allowing time to repay the missed payments and fees. If foreclosure occurs, the right of redemption allows mortgagors to reclaim their property.
How Right of Redemption Can Be Exercised
A right of redemption may be exercised during a redemption period before or after a foreclosure auction. Every state allows borrowers to exercise their rights of redemption prior to foreclosure proceedings. Some states also allow redemption after a foreclosure sale, with different repayment rules. Borrowers tend to exercise this right after a foreclosure if they have the means to cover the outstanding debt and fees.
How Right of Redemption Helps Borrowers
Although the right of redemption can potentially help borrowers stay in their homes, it is not commonly practiced due to the difficulty of coming up with the necessary funds. However, in certain cases, borrowers can turn a profit by reclaiming a property sold below market value and reselling it at or above market value. Not all states allow-profit opportunities, and some may require full debt repayment instead of the foreclosure sale price.
