Right of Redemption

Reviewed by Bhavana | Updated on Aug 27, 2020

What Does Right of Redemption Mean?

It is the legal right of a borrower or mortgagor who owns the immovable property to reclaim his or her property once certain conditions have been fulfilled. The right of redemption renders property owners, who are paying back taxes or liens on their property, the ability to avoid auctioning off their property, sometimes even after an auction or sale has taken place.

Generally, the amount paid should also include the costs incurred during the foreclosure process in addition to the entire mortgage amount in case the payout occurs after-sale or foreclosure.

When Can the Right of Redemption Be Used?

During a time frame which is known as the redemption period, a right of redemption may be availed, which may be before or post a foreclosure auction has been concluded. Under the common practice, lenders prefer to exercise a right to redemption only after a foreclosure if they have the resources to seek at all, despite the possibility to take action before a foreclosure sale.

This is because it is impossible that lenders who already have adequate funds to cover the costs of paying the entire outstanding debt and other charges will go into default.

In certain situations, it is possible for the creditor to make a profit when they exercise a right of redemption following a sale of the foreclosure. In a foreclosure auction, a property could sell below its market value.

Key Pointers

  • It is a legal process, where a delinquent mortgage borrower can reclaim his/her home or other property subject to foreclosure if he or she can repay respective obligations in time.

  • This right can be availed even if a lender has re-sold the home, as long as it occurs during the time frame of the redemption period and all conditions have been fulfilled.

  • A good redemption would typically require a creditor to recover all expenses incurred as a result of the foreclosure process to the lender or other parties.