A homeowner can stop a foreclosure by completing a mortgage reinstatement or paying off the loan. In a loan reinstatement, you need to find just enough cash to get caught up on the overdue amounts you owe the lender. On the other hand, a payoff requires you to get your hands on a lot more money—enough to repay the lender in full.
Some state laws and many home-loan contracts give homeowners a mortgage reinstatement right. And in all states, homeowners get the right to pay off the loan to stop a foreclosure sale. (This right is known as the "equitable right of redemption.")
If you don’t receive a reinstatement or payoff amount from the servicer after requesting one, you might be able to challenge the legality of a foreclosure sale if it happens.
What Is a Mortgage Reinstatement?
“Reinstating” a mortgage loan is when a borrower gets caught up on the past-due amounts in one lump sum, which will stop a foreclosure. After a mortgage reinstatement, the borrower returns to making regular, monthly payments on the loan.
What Is a Reinstatement Quote?
If you want to reinstate your mortgage loan, you’ll need to find out exactly how much it will take to bring the loan up to date. Contact your loan servicer and ask for a "reinstatement quote" or "reinstatement letter." The reinstatement quote that the servicer sends you will provide the precise amount you need to pay to get current on the debt and a good-through date for that amount. If you miss the deadline in the quote, you’ll need to request a new letter that includes any additional charges.
How Much Does It Cost to Do a Mortgage Reinstatement?
To complete your mortgage reinstatement, you’ll typically have to pay the following:
- the overdue payments and any payment that’s now due, including principal and interest
- late fees
- the cost of any property inspections, if applicable
- the foreclosure attorneys' or trustee's fees and costs
- any other expenses the servicer incurred when preserving and protecting the lender's interest in the property (for example, if you abandoned the home, the cost of boarding up windows and doors), and
- sometimes, a fee for recording a notice canceling the foreclosure sale.
What Is the Deadline for a Loan Reinstatement?
State statutes sometimes provide a statutory right of reinstatement, which means you get the right to reinstate the loan because state law says so. Also, the terms of most mortgages and deeds of trust give the borrower a right to reinstate and the deadline to do so. And some lenders are willing to accept a reinstatement payment, even if it doesn’t have to under state law or the loan's terms.
The deadline to reinstate might be 5:00 p.m. on the last business day before the foreclosure sale date or perhaps five days before the foreclosure sale or some other cutoff time. Check your loan documents and your state’s statutes to determine the deadline in your specific circumstances. (Review Nolo’s Key Aspects of State Foreclosure Law: 50-State Chart to find out whether your state’s laws provide a reinstatement right during the most commonly used foreclosure procedure for your state.)
Generally, it’s a good idea to complete a loan reinstatement well before the deadline. If you wait until the last minute to reinstate the mortgage and, for some reason, your payment doesn’t go through—like if a bank processing error happens—you could miss the deadline and lose your home to a foreclosure sale.
Fully Repaying the Lender With a Loan Payoff
Another way to stop a foreclosure sale is to pay off the full loan amount. After paying off the loan, you no longer have a balance with the lender and don’t have to make further payments.
Usually, it’s difficult for borrowers facing a foreclosure to come up with enough money to pay off a loan. Remember that most lenders offer other alternatives to foreclosure, like modifications, to borrowers struggling to make their mortgage payments.
How Much Will It Cost to Pay Off the Loan?
While your monthly mortgage statement shows the outstanding principal amount you owe on the loan, that amount isn’t the payoff amount because it doesn’t include interest or other charges. To pay off the loan, you must pay the entire unpaid principal balance plus interest, fees, and costs. You'll have to pay fees and costs similar to those in a reinstatement.
Get a Payoff Quote
To get a payoff quote, contact your loan servicer and ask for a "payoff letter" or "payoff statement." The statement will tell you the total amount you owe on the loan and a deadline to pay. The quote might also tell you how much you need to pay if you send your payment a few days before or after the provided payoff date.
How Quickly the Servicer Must Provide a Payoff Amount
Under federal law, the servicer generally has to send a payoff statement within seven business days of a request. Some exceptions apply, like if the loan is in bankruptcy or foreclosure, the loan is a reverse mortgage, or you didn’t follow the servicer’s requirements for making a payoff request. If an exception applies, the servicer must provide the payoff statement within a reasonable amount of time.
Deadline to Pay Off the Loan
You typically have to request a payoff quote at least five business days before you plan on actually paying. If you don't deliver the payoff money before the foreclosure sale, the sale will go ahead. So, it’s usually a good idea to make the payment well before the foreclosure sale is scheduled to take place. Again, if a bank processing error or other delay happens and the funds don’t arrive before the sale, you could lose your home.
How to Dispute the Amount of a Reinstatement or Payoff Quote
If you think the reinstatement or payoff amount you receive from the servicer is incorrect, contact the servicer to dispute the figure. If your dispute goes unresolved, under federal law, you may send a “notice of error” to the servicer. The notice of error should include:
- your name
- information that enables the servicer to identify your mortgage loan account and
- the mistake you think happened.
You can send your notice by mail (certified, return receipt requested) or, in some cases, online.
How Soon a Servicer Must Correct a Mistake
With a payoff amount, a servicer has to fix a mistake, if there is one, within seven days, excluding holidays and weekends, after receiving a notice of error. With a reinstatement amount, a servicer generally has to fix a mistake within 30 days or before the foreclosure sale, whichever is earlier.
If a foreclosure sale is looming, it often makes sense to pay the reinstatement or payoff amount—even if you think the figure is wrong—just to make sure the foreclosure sale doesn’t happen.
Getting Help
If you need help getting a reinstatement or payoff amount from your servicer or want information about other ways to stop a foreclosure sale, like filing for bankruptcy, consider contacting a foreclosure attorney or a bankruptcy attorney.
And keep in mind that other options are available for avoiding a foreclosure. If you need help negotiating a different way to prevent a foreclosure, like a loan modification, forbearance agreement, or repayment plan, consider talking to a HUD-approved housing counselor.