If your home secures a mortgage, part of your mortgage payment may go toward an escrow account. The lender uses these funds to make your property tax and insurance payments. Most lenders require borrowers to maintain these accounts, so you cannot demand a full refund unless your loan is paid off. However, you may be able to request a cancellation of the account, or you may receive an overage check if the account balance becomes too high.
The Real Estate Settlement Procedures Act describes lenders' rights and responsibilities with regard to borrowers' mortgage escrow accounts. RESPA doesn't force lenders to hold escrow accounts. However, it doesn't stop them from doing so, either. If your lender elects to require you to pay money into an escrow account while your loan is active, you can't close the account or receive a full refund unless the lender agrees to it.
Canceling the Account
At the time of publication, lenders can require you to maintain an escrow account regardless of your loan balance or payment history. However, you can still request a cancellation of the account if you want to make your tax and insurance payments on your own. Granting such a request will be at the lender's discretion. However, if you have a low loan-to-value ratio and a solid history of on-time payments, it may agree to refund the balance of the account.
Paying the Loan
If the lender won't agree to waive your escrow requirement, the only other way to receive the balance of the account is to pay the balance of the loan. You may accomplish this through a refinance, through the sale of the home or by simply paying the balance in cash. As soon as your loan is paid in full, the lender must refund the balance of your escrow account.
You may receive small, periodic refunds from your escrow account because of surpluses. Under RESPA, lenders can require you to maintain a cushion of no more than one-sixth of your yearly escrow obligations, or two months' worth of escrow payments. Once each year, lenders must also analyze the account's balance to make sure that the account doesn't contain more than it should. If the account balance is too high, RESPA requires the lender to send you a refund or apply it to future payments, depending on the size of the overage. However, the refund you receive in this case will be significantly less than the balance of the account.