A Minnesota homeowner's property was sold at a non-judicial foreclosure sale on September 1 for $175,000. The outstanding mortgage balance at the time of the sale was $195,000. The standard 6-month statutory redemption period applies. If the homeowner wants to redeem the property, she must pay the full redemption amount, which equals the foreclosure sale price plus 5% interest for the redemption period. What is the total redemption amount the homeowner must pay if she redeems on the last day of the redemption period (March 1 of the following year)?
Correct Answer
A) The homeowner must pay $179,375 to redeem the property
Step 1 — Identify the redemption base: Under Minnesota law, the redemption amount is based on the FORECLOSURE SALE PRICE ($175,000), not the outstanding mortgage balance. Step 2 — Calculate interest for the redemption period: The redemption period is 6 months (September 1 to March 1). Annual interest rate = 5%. Interest for 6 months = $175,000 × 5% × (6/12) = $175,000 × 0.025 = $4,375. Step 3 — Calculate total redemption amount: $175,000 + $4,375 = $179,375. The homeowner must pay $179,375 to redeem the property.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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