Legal Definitions - Right of Redemption

The Right of Redemption is a legal provision in some states that allows a homeowner, who has lost their property through a foreclosure sale, to reclaim ownership of that property. To exercise this right, the former homeowner must pay the lender the entire amount of the outstanding mortgage debt, along with any associated fees and costs incurred during the foreclosure process, within a specific timeframe after the foreclosure sale has occurred. The availability and duration of this right are determined by state law, meaning it can vary significantly from one state to another.

Here are some examples illustrating the Right of Redemption:

• Example 1: Unexpected Inheritance

  Sarah's home was foreclosed upon after she lost her job and couldn't make her mortgage payments. A month after the foreclosure sale, but still within her state's six-month redemption period, Sarah unexpectedly inherited a substantial sum of money from a distant relative. She used these funds to pay her former lender the full amount of her outstanding mortgage balance, plus all the foreclosure-related fees. By doing so, Sarah successfully exercised her Right of Redemption and regained ownership of her home.

  Explanation: This example demonstrates the Right of Redemption because Sarah, the former homeowner, was able to recover her property after foreclosure by paying the full debt and fees within the legally defined redemption period.

• Example 2: Family Assistance After Foreclosure

  David's property was sold at a foreclosure auction due to his inability to keep up with payments following a medical emergency. His state allows for a three-month redemption period. Two months after the auction, David's siblings pooled their resources to help him. They provided him with the necessary funds to pay off the entire remaining mortgage debt, including all the costs the bank incurred during the foreclosure process. David then presented this payment to the lender, thereby redeeming his property.

  Explanation: Here, David utilized the Right of Redemption by securing the necessary funds (even with family help) to pay off the full amount owed to the lender within the statutory period, allowing him to reclaim his home after it had been foreclosed.

• Example 3: New Employment Opportunity

  Maria's small business failed, leading to the foreclosure of her commercial property. Her state has a one-year redemption period for commercial properties. Six months after the foreclosure sale, Maria secured a lucrative new job and received a significant signing bonus. She decided to use a portion of this bonus to pay the full outstanding balance of her original mortgage, along with all the legal and administrative fees from the foreclosure. This action allowed her to recover her business property.

  Explanation: This scenario illustrates the Right of Redemption as Maria, after losing her property to foreclosure, was able to gather the required funds from a new financial opportunity and pay the full debt and associated costs within the redemption period to get her property back.