How to cancel mortgage escrow account
Q: I purchased a home in Ohio last spring. The purchase price was $240,000. I put down 30% borrowing $168,000. Unbeknownst to me, the lender set up a mortgage escrow account which resulted in $250 increase in monthly payments. I want to make taxes and insurance payments directly to the county and insurance company. I feel like I am giving money away for free to my lender, which also charges the interest on the mortgage. How can I cancel this escrow account?
A: In general, rule of the thumb conditions that a borrower should meet in order to cancel a mortgage escrow are something like this stack,
- mortgage is at least a year old, no late payments for the last 12 months, Loan-to-Value is under 78%
- mortgage is a conventional loan and is of neither VA nor FHA variety
- neither county taxes nor insurance payments are due in the next 30 days
The problem is those rules are not easily enforceable and lenders often play hardball. Once they got that extra money, and a nice chunk of it and for free, they like to keep it putting your money to work for themselves, not for you. Many banks demand a fee, up to $500 if you wish to cancel an existing escrow account. Others may agree, but increase your mortgage interest rate by .25%. Certain states have their own provisions that can benefit either you or lender.
So in many cases, it is easier to refinance, as long as it makes sense - you are to get a better interest rate, closing costs will be covered, etc. Sometimes, you can try telling the bank which holds your mortgage that unless they cancel escrow account, you refinance with a different lender. It may or may not work.
Tue Dec 14, 2010 09:12AM | Copyright: www.bad-credit-advisor.com | More in Mortgage | Comments (0)
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