How to Cancel an Escrow Account Without Refinancing the Mortgage

Mortgage lenders utilize escrow accounts to ensure that their borrowers' property taxes and homeowner's insurance premiums are being paid on time. In some cases, maintaining an escrow account is actually a requirement of the lender. Typically this applies to special loan programs -- such as FHA -- or if the borrower has a low down payment. If you currently have an escrow account, it might be possible to cancel without refinancing the mortgage. However, the final decision is up to the lender.

Step 1

Review the loan documents pertaining to the escrow. Look for information regarding the escrow requirements or cancellation. If you can't find the information or it's unclear to you, contact your lender directly for more details.

Step 2

Write a formal letter to the lender to request a cancellation of your escrow account. Send any applicable cancellation fees with the letter.

Step 3

Wait for the lender's response. Once your escrow is cancelled, you will need to budget accordingly to pay for taxes and insurance when they are due.

Items you will need

  • Loan documents

Tips

  • Not all lenders are willing to cancel escrow accounts. Those that are typically have some general criteria before they will approve a cancellation. The criteria includes: your loan-to-value ratio should be below 75 percent, you should have an excellent payment history and no payments out of the escrow account are due within the next 30 days.
  • It might be possible to negotiate with the lender with regards to the cancellation fee.

Warnings

  • Government-backed loans are not eligible for escrow cancellations.
  • It's common for banks and lenders to sale mortgage loans to one another. If your loan was sold, the escrow cancellation will need to be approved by the bank or lender that currently owns the loan. This will create more work on your part because you will need to determine who owns your loan before you can contact them about cancelling.
  • If the lender is unwilling to cancel the escrow account refinancing would be the only option to get out of paying escrow each month.

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