Question:

When is closing escrow account possible?

Answer:

An escrow account is commonly used by lenders to make sure property taxes and homeowners are paid. Closing escrow account is only possible when you no longer are paying PMI. In that sense, if you are not paying PMI at all, some loans will allow you to pay taxes and insurance yourself and avoid setting funds aside for an escrow account.

Why is an escrow account used at all?

Escrow accounts are used with the purpose of saving the lender's collateral - help avoid the case when the state forecloses on the property. If a borrower does not pay taxes, the state may foreclose on the property and the lender will have lost their collateral. So, through an escrow account the lender makes sure property taxes are paid and foreclosure will not take place.

Some FHA and VA loans may require opening an escrow account as a condition to get a mortgage. With conventional mortgage loans, if you need private mortgage insurance (PMI), you will be required to open an escrow account. When you no longer need a PMI, you can close the escrow account.

Closing the escrow account is only possible after you build over 20% equity on you house. Remember to ask the lender to close your escrow when requesting PMI cancellation, if you want to make taxes and hazard insurance payments on your own.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
Was this Mortgage QnA helpful?
Not at all
  • Currently 3/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
Definitely
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA: