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Foreclosure and Keeping Your Equity You don't forfeit the equity in your property after banks auction off your home in foreclosure. However, once the home is sold at auction, the adverse effects of foreclosure will chip away at that equity before you are paid the remainder.
The right of redemption gives mortgagors the opportunity to reclaim their property and stop a foreclosure sale from happening, or, in some cases, even repurchase their property after a sale has occurred.
The foreclosure process derives its legal basis from a mortgage or deed of trust contract, which gives the lender the right to use a property as collateral in case the borrower fails to uphold the terms of the mortgage document.
In addition to paying off your remaining mortgage debt, selling with equity provides the most flexibility and avoids the credit damage caused by foreclosure.
Also called the statutory right of redemption, redeeming your property after a foreclosure sale is useful if you cannot gather the funds necessary to redeem your home before the auction takes place or if the lender accelerates the foreclosure process.