DEFINITION of 'Foreclosure Buyout'

A refinancing program that allows a homeowner to avoid foreclosure on their home. Foreclosure buyouts are typically a refinancing loan which the homeowner obtains to cover the portion of the current mortgage that is in default. Of course, finding a lender that will lend to a borrower that is in the process of being foreclosed on can be difficult and if successful, the loan will usually be accompanied by a high interest rate.

BREAKING DOWN 'Foreclosure Buyout'

Foreclosure buyouts skyrocketed in the wake of the 2008 subprime meltdown. Customers who use this service generally are required to have a minimum of 25% equity in the home before a loan is considered. This is to offset the risk to the lender should the borrower default on the foreclosure buyout loan. Foreclosure buyouts can also be referred to as foreclosure bailouts.

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RELATED FAQS
  1. How Many Mortgage Payments Can I miss Before Foreclosure?

    The status of your lender and the condition of your local housing market are some of the factors that determine how many ... Read Answer >>
  2. What is PMI, and does everyone need to pay it?

    Also known as "Primary Mortgage Insurance," PMI is the lenders (banks) protection in the event that you default on your primary ... Read Answer >>
  3. How is a leveraged buyout different from a buyout?

    Learn about leveraged buyouts and circumstances under which an acquiring company wishes to pursue a buyout funded mostly ... Read Answer >>
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