If you have a mortgage escrow account, you may see an option to delete it. But should you do it?
the listener of clark howard podcast I recently asked a money expert if it made sense to close a mortgage escrow account after his bank contacted him.
Clark, who knows the benefits that come from such accounts, says he’s surprised that financial institutions even allow homeowners. know That there was an option to exit escrow.
What is an escrow account and how does it work?
An escrow account is an account that requires the mortgage bank to fund the homeowner’s insurance and property taxes. But Clark said banks will make a profit on the deal.
“Escrow is the bank’s profit center for mortgages, offering year-round interest-free loans,” says Clark. “They’re allowed to over-collect from you under regulation, so they’re making money that isn’t even used to pay taxes and insurance premiums.”
the good news is You can close your escrow account when you reach qualifying pointsFactors that may cause an escrow account to be deleted include:
- Acquire a certain amount of assets in housing.
- Payment of Escrow Waiver Fees. More on this later.
Should I close my escrow account?
Yes, you should consider closing your mortgage escrow account if given the option by your lender, Clark says.
Be aware that some lenders charge a fee for doing so.according to rocket mortgagewhich is “equal to a small percentage of your loan amount”.
Not sure if you have to pay an escrow waiver fee? Please contact your landlord for more information regarding your individual case.
“Some lenders will say, ‘Hey, I’m going to charge you a quarter of a point to remove this,'” says Clark. “But if they’re just saying, ‘You hit the qualifying mark.’ As long as you don’t forget to pay taxes and insurance, you can remove the escrow.”
As you can see, Clark puts a big caveat in his answer. “Unless you forget to pay taxes and insurance.””
Once you’ve closed your mortgage escrow account, it’s your responsibility to pay your home’s taxes and insurance premiums directly to the government and insurance company. If you don’t think you remember to do so, Clark recommends keeping your account open and continuing to make payments.