What is Equitable Redemption?
The term "equitable" means fair, and the idea behind equitable redemption is that it is only fair that you should have a window of time to redeem or save your house from foreclosure. This principle does not apply in all states, but some state laws are very generous. If you can come up with the money, you may be able to get your home back even after someone else buys it at a foreclosure sale.
You Can Redeem Your Property before Foreclosure
You can usually stop the foreclosure process through equitable redemption at any point - from the time your lender begins the foreclosure process right up to the time of the foreclosure sale. You must usually pay the entire amount of your mortgage, satisfying the debt in full so that the mortgage is no longer a lien against the home.
You Can Buy Your Own Property at a Foreclosure Sale
Although not technically equitable redemption, the laws in most states allow you to buy your house back at the foreclosure sale. If you can't raise the money to redeem your home before the sale is held, you can attend the auction and bid on your home. If you are the high bidder, you keep the house. This type of purchase usually requires cash, and you can't take out another mortgage to satisfy the first one, even if your credit is still healthy enough to qualify for a home loan.
You Can Buy Your Property Back After Foreclosure
In some states, you can even redeem your home after someone else purchases it at auction. For a limited period of time after your home sells, you can buy it back from the high bidder if you can come up with the money. The high bidder doesn't officially own the house until this time has passed. He can lose it back to you if you pay off your mortgage during this period.
Some Limitations Apply
In addition to paying off your existing mortgage, you must pay any interest on the loan that came due after the lender began foreclosure proceedings. You might also have to pay legal fees as well as the lender's other costs of foreclosure.
You can usually continue to live in your home for a while after a foreclosure sale in states that allow you to redeem after the sale – but you might have to pay rent to the high bidder during this time. Usually, you can redeem your house after a sale only if your lender foreclosed by filing a lawsuit rather than just giving you notice.
A Foreclosure Lawyer Can Help
The law surrounding equitable redemption in residential foreclosure is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a foreclosure lawyer.