Definition: Equity of Redemption – the right of a borrower to redeem (i.e., buy back) his or her property by paying off the outstanding mortgage debt in full.
Don’t confuse this term with the Right of Redemption of a borrower. The Right of Redemption is the ability of the borrower to bring the mortgage back into good standing and recover title to their property at any time. This right exists at any time, before or after the court imposed redemption period expires, up until such time as the property is sold on the open market to a 3rd party.
After the borrower has been identified as in default, the borrower retains an equitable right to redeem the mortgage and discharge the property from encumbrance. The Law of Property Act provides periods of redemption, typically 6 months for residential property, but this is heavily dependent upon the amount of equity available in the property.
The redemption period set by the courts outlines the time period the courts have given the borrower to act before the court orders the sale of the property or affords the bank title ownership. Title ownership by the bank can be achieved either through a transfer of title to the lender or a direct sale of the property to the lender. In the latter case, the borrower no longer has rights to the property.
What is important for you to know is that if the court assigns the ownership to the bank only through a transfer of title, the borrower still has rights over the property.
Therefore, the borrowers rights to redeem the property do not end at the time the court appointed redemption period ends, but rather, remain in force as long as the bank still holds that property and has not sold it to a 3rd party. The borrower still can come back, pay all arrears and legal fees, get title back and continue with the original mortgage!