No one wants to find themselves losing their home to foreclosure, but if you’re in this situation, there’s potentially still time to recover using the right of redemption.
What is right of redemption?
Right of redemption is a legal process that gives homeowners who have fallen behind on their mortgage payments the opportunity to keep their home by paying the money they owe, plus interest and fees.
Depending on where you live, the right of redemption might apply up until the foreclosure proceedings, or even after the foreclosure sale, up to a certain period of time.
Mortgage lenders use the home you buy as collateral or security for your mortgage. If you fail to make payments on the loan, your lender can foreclose and sell your home to recoup the money it lent you. If, during a set redemption period, you can pay your mortgage balance, plus certain fees, in full to the lender, you can reclaim your home.
In some states, you can even exercise this right after the foreclosed home is sold to another party by paying that party the amount they paid, plus certain expenses. This is known as the statutory right of redemption because it stems from various state statutes related to homeownership.
How to exercise right of redemption
When you fail to make payments on your mortgage, your lender can begin the foreclosure process. Typically, it starts by sending the borrower a notice of default to alert them of the missed payments and the amount owed. This notice usually gives the borrower a period of time to make up the missed payments, plus late fees, to avoid foreclosure. At this time, borrowers can also choose to fight the foreclosure if they believe the lender doesn’t have the right to foreclose.
After the period outlined in the notice of default, the lender can foreclose on the home and put it up for sale.
To exercise the right of redemption, the borrower can write to their lender or servicer, or to the party that purchased the home, and request a statement of charges related to the home. This statement should outline the foreclosure price of the home plus any related fees. If the borrower is able to pay this amount, in full, they’ll get to keep the home.
The amount of time that borrowers have to exercise this right varies by state. For example, in Alabama, borrowers have the right for up to one year after foreclosure, while Illinois gives borrowers just 30 days after the sale.
Investors who buy foreclosed homes have to be prepared for the previous owners to exercise this right. If you’…….