How to Cancel an Escrow Account Without Refinancing the Mortgage

You might be able to pay the escrowed portion of your house payment separately.
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An escrow account is both convenient and inconvenient. On one hand, you don't have to worry about remembering your property tax or insurance payments or having the money in your checking account to make these large, lump-sum payments. On the other hand, your mortgage payment can fluctuate from year to year if taxes or insurance premiums change. If maintaining an escrow account is not mandatory on your loan and your loan-to-value ratio is good, you may be able to cancel it without the cost of a full refinance. Contact your lender to start the escrow cancellation process if you think that's the best option for you.

Step 1

Find copies of your loan documents. Locate a document titled “Escrow Agreement” or equivalent.

Step 2

Review the escrow agreement for the terms and conditions related to the account. Look for two particular items: if maintaining an escrow account is mandatory and if there is a fee to cancel it.

Step 3

Contact your mortgage lender if an escrow account is not mandatory on your loan. Ask what its procedure is for canceling escrow accounts. If there is a cancellation fee and you wish to negotiate, do so at this time. Cite factors such as your history with the company and deposit relationship as reasons to waive the fee.

Step 4

Submit a written request to cancel the escrow account. If the bank has its own cancellation form, complete and submit it to the mortgage department.

Step 5

Contact your taxing authority and insurance company once the process is completed. Inform both companies that you will be paying your own taxes and insurance in the future.

Step 6

Pay your taxes and insurance on time. If you start to miss payments, the bank may require you to re-open the escrow account. If this happens, it is unlikely the bank will agree to cancel the account a second time.

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