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Escrow account: Is it possible for a borrower to cancel it?

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 26th Oct, 2006 08:09pm
An escrow account is set up by the lender at the time of closing of the loan. Homeowner adds funds to this account to pay real estate taxes, property insurance and home repairing expenses. In some cases lender establishes this account as a condition for obtaining a mortgage loan at better rate or for getting a loan with low credit score. Anyways, in some cases, you have the rights to cancel the escrow account by contacting your lender. In the following situations, you can cancel the escrow account.

  • If you have a perfect payment history, you can approach your lender for canceling the escrow account.

  • Your loan to value (LTV) ratio should be less than 80% for getting the cancellation approval. To calculate the LTV ratio, you should know the current market price of the house and the mortgage balance. To get an estimate of the current market value of your home, you can get in touch with a property appraiser.

If you fulfill these criteria, you can call your lender and ask for cancellation of the escrow account. Your request should be in written form. After judging your case, the lender takes the final decision.

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Posted on: 26th Oct, 2006 08:09 pm
I have a mortgage with credit union? My every monthly payment goes into an escrow account. Is it possible to cancel the escrow account any time without paying any penalty.
hi martin,

as far as i know, most lenders do not allow borrowers to cancel the escrow account on the existing loan. the only way to get rid of the escrow account is to refinance the loan with the existing lender or write a new loan with a different lender.


Posted on: 26th Oct, 2006 08:27 pm
Once an escrow account is in place, it becomes quite difficult to convince the lender to cancel it. If your loan is sold to a third party, then you will have to agree with what the new mortgage company or lender has to say.
Posted on: 26th Oct, 2006 09:58 pm
Can the seller cancel escrow on a short sale and open with another client
Posted on: 22nd Jul, 2008 01:34 pm
If we are in escrow and have bank approval and the seller now has put back on the market because it has been 45 days and does not want to give extension can the seller do that it is a short sale.
Posted on: 22nd Jul, 2008 01:43 pm
No i am pretty sure that you cant do that, or if you can it is really difficult
Posted on: 23rd Jul, 2008 02:55 am
made offer....opened escrow gave money.....decided to cancel purchase....monies not returned over 2 weeks...ADVISE PLEASE
Posted on: 11th Nov, 2008 01:34 pm
Hi ilan,

As far as I know, the lender can place a penalty for cancellation of escrow. May be the lender has taken the money from your escrow deposits as a penalty. However, to be on the safer side, I would suggest you to talk to the lender once and ask the reason for not paying you the money.


Posted on: 12th Nov, 2008 01:23 am
Chase purchase my mortgage from another company they are saying that the escrow account is short but the pervious year they sent me back a check for almost 2,000 and now they want to raise my payment a 150 plus an additional 159.00 for a shortage over 12 months can they do this
Posted on: 27th Mar, 2009 05:23 pm

They can do this. If the escrow account is too short to cover the property tax and insurance expenses, they can raise the payment. An escrow account is after all for your benefit so even if you face some financial problem, you would still be current on your property tax and insurance payments. However, you should definitely check with Chase what caused this raise in your escrow payments.
Posted on: 28th Mar, 2009 03:34 am
it's pretty evident that the previous year's escrow analysis was erroneous, and that chase now has to compensate for that error. perhaps your taxes have increased dramatically - that's another possibility.

in any event, savior70 is correct in stating that chase is doing what it should do. in order to pay your tax (and insurance, i gather) when due, there needs to be sufficient funds in the escrow account. in order to make up for the shortage, they need to increase your payment accordingly.
Posted on: 28th Mar, 2009 04:58 am
If you have a Conventional Loan and you do not have PMI (Private Mortgage Insurance), you have the option to close your escrow account and make your own tax and insurance payments. If you have a VA or FHA loan, the maintenance of an escrow account was a condition for the funding of your government-insured loan. In this case, the escrow account cannot be waived or altered.
Posted on: 03rd Apr, 2009 10:19 pm
I understand that an escrow account is for your benefit, however can a mortgage co. place you in a escrow account without your consent and if so what are some of the circumstances? By the way i have a conventional loan.
Posted on: 16th Apr, 2009 01:40 pm
Hi reggie!

Welcome to Forums!

The lender will have to inform you about the escrow account whether it's a conventional loan or a FHA loan.

Posted on: 16th Apr, 2009 09:20 pm
reggie with some programs there is no choice; it would be a requirement. with some other programs, a lender can waive the escrow requirement, but it typically costs you .25% as an upfront cost.
Posted on: 17th Apr, 2009 06:00 am
I have my mortgage through chase. 2 weeks ago they told me i had too much money in my escrow account and sent me a check. Today i got my usual mortgage statement and they have increased my mortgage/escrow payment by 300.00 per month! Our house is a new build. It has assesed for 60K less then the purchase price in less than a year. There has been No increase in our taxes. So if my house is worth less money and the taxes have no increased would one assume that my payment should go down based on the assesment coming in soooo much lower than my purchase price? Im confused and quite angry. HELP!
Posted on: 07th May, 2009 04:18 pm
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