Right of Redemption: Definition and How to Exercise the Right

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The right of redemption is a borrower’s legal right to reclaim real estate lost to a mortgage default by paying what the law requires within a set time. Before a foreclosure sale, that usually means paying the full overdue debt plus interest, fees and costs. In states that allow redemption after the sale, it may mean paying the foreclosure sale price plus interest and allowed costs instead. In many of those states, the owner can also sell the right to someone who then redeems in the owner’s place.

How the Right of Redemption Works

A mortgage makes the home collateral. When payments stop, the lender can foreclose under the mortgage documents, within limits set by state and federal law. After a default notice, the borrower generally has a window to cure the missed payments and late fees, or to contest the foreclosure if the lender lacks the right to proceed.

Redemption sits on top of that process and comes in two forms.

Equity of redemption (before the sale)

The equity of redemption is a common-law right that exists in every state. Until the foreclosure sale is completed, the borrower can redeem by paying the entire outstanding loan balance, not just the missed installments, plus accrued interest, penalties, and the lender’s foreclosure costs. Paying only the arrears is called reinstatement, a separate right that some states and many loan contracts provide.

Courts have long refused to let lenders strip this right away in the loan documents. A clause that tries to cut off the borrower’s ability to redeem before foreclosure is generally unenforceable under the doctrine against “clogging” the equity of redemption. A court judgment of foreclosure, or a completed sale, is what ends it. Filing a foreclosure action alone does not.

Statutory right of redemption (after the sale)

The statutory right of redemption exists only where a state statute creates it. It gives the former owner a fixed redemption period after the foreclosure sale to buy the property back. Depending on the state, the period can run from a few months to a year or more, and its length can turn on factors such as whether the foreclosure was judicial or nonjudicial, whether the property was abandoned, or how much of the loan had been paid.

The price is often the foreclosure sale price plus interest from the sale date and certain costs the buyer incurred, such as taxes or insurance. Some statutes instead require repayment of the full debt. Some states also extend redemption rights to junior lienholders, such as a second mortgage lender, and some let the former owner stay in the home during the period. A buyer at a sale subject to redemption holds title that can be undone until the period expires, and typically receives a final deed only then. This is one reason bids at these auctions may be lower.

Property tax sales follow a parallel system. Many states let an owner redeem a property sold for unpaid taxes by paying the delinquent taxes plus a statutory interest or penalty within a set time.

How to Exercise the Right of Redemption

The steps vary by state, but the process usually looks like this:

1. Confirm which right applies. Determine whether the sale has occurred and whether your state provides post-sale redemption for this type of foreclosure.
2. Find the deadline. The redemption period is counted from a specific event, such as the sale date or the confirmation of sale. Missing it ends the right.
3. Get the exact redemption amount. Request a written payoff or redemption figure from the lender, the sale purchaser, or the official who conducted the sale (often a sheriff or trustee). Interest typically accrues daily.
4. Pay in the required form. Statutes often require certified funds delivered to a named party, sometimes with specific notices or affidavits.
5. Record the result. A certificate of redemption or a new deed is generally recorded to restore title.

Because the money comes due at once, borrowers often look to refinancing, a family loan, or a sale of the right itself.

Selling Redemption Rights

Where state law treats the statutory right as assignable, the former owner can transfer it by a written assignment or a quitclaim deed. The buyer, often a real estate investor, pays the owner for the right, then pays the redemption amount and takes title. Some states regulate these transactions, for example by requiring notice to the sale purchaser or limiting who may redeem, so assignment is not available everywhere.

Selling makes sense when the property’s market value is well above the redemption price but the owner has no cash to redeem. The owner gets money that would otherwise go to the auction buyer, and the investor captures part of the spread.

Example of Right of Redemption

Hypothetical example, assuming a state that allows post-sale redemption at the sale price plus 8% annual simple interest and documented costs.

• Mortgage balance at default: $250,000
• Foreclosure sale price: $180,000
• Market value: $260,000
• Redemption made 6 months after the sale
• Purchaser’s documented costs (taxes, insurance): $3,000

Interest: $180,000 × 8% × 6/12 = $7,200 Redemption amount: $180,000 + $7,200 + $3,000 = $190,200

The former owner who redeems regains a $260,000 home for $190,200. Alternatively, the owner could assign the right to an investor for, say, $35,000. The investor’s cost would be $225,200, leaving room for resale costs and profit, and the owner would walk away with cash instead of nothing.

The example does not settle the remaining $70,000 gap between the debt and the sale price. In states that allow deficiency judgments, the lender may still pursue the borrower for that balance, so redeeming at the sale price does not necessarily clear the original loan.

Limitations of the Right of Redemption

• Cash requirement. Before the sale, redemption means paying off the whole loan, which is rarely possible after missed payments.
• Strict deadlines. Courts generally enforce redemption periods as written.
• Possible deficiency. Redemption at the sale price may leave other liability intact.
• Costs keep growing. Daily interest and added expenses raise the price the longer the owner waits.

Right of Redemption vs. Related Terms

The Bottom Line

Homeowners facing foreclosure should check their state's rules on redemption deadlines, required payment, and whether the right can be sold. Redeeming takes a lump sum that grows with daily interest, so many owners refinance, borrow from family, or assign the right to an investor. Redeeming at the sale price may not end liability where deficiency judgments are allowed.