How to Remove Mortgage Escrow

Get clear on your lender's rules before attempting to remove escrow.

Get clear on your lender's rules before attempting to remove escrow.

Making your money work for you is good financial practice. So why would you let your mortgage lender hold your money in an escrow account, interest-free for months when that money could be earning interest or dividends elsewhere? If you're looking toward removing mortgage escrow, tread carefully. Not all lenders and loan products can be detached from escrow. And even when escrow can be removed from a mortgage loan, banks have different rules about how to accomplish it.

Find out whether you can remove the escrow account. It's forbidden by law, for example, to remove escrow from a Federal Housing Administration loan. Most lenders also won't remove escrow from a Veterans Administration loan, but no federal law prohibits it.

Bring your insurance and property tax payments up to date. Get the balance and payment instructions from your local property tax authority and your insurance company, and get a receipt for your payments. If the payments are not current, your lender won't let you close the escrow account.

Put your escrow account balance into the black. As with any type of account, you typically will not be allowed to close it if the balance is negative.

Put your escrow account closing request in writing. Type the number of your mortgage loan and the property address in the letter. Enclose copies of payment confirmations to show that your tax and insurance payments are current.

Look for a letter from the lender confirming the account has been closed. If there was money in the account, you'll get a refund check with the letter.

Tips

  • Some banks will only allow you to close escrow if your mortgage payments have been consistently timely.
  • You may need to appraise your property before taking steps to close escrow. Some lenders won't let you close the account if your loan balance exceeds 80 percent of your home's value.

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