My servicer recently switched to Mr Cooper, and they’re raising my monthly bill by about $300, projecting my taxes to be almost $2300 more than what I currently pay. However, in NJ, the new rates don’t come out until July. This situation has confused and upset me, as they’re adjusting my escrow now instead of waiting until the new rates are published. I’m considering removing property taxes from my mortgage once the new rates are out if they are as I suspect, not $2300 higher. Has anyone gone through this process? What was it like?
You should call them and inquire if it’s possible to remove escrow from your mortgage.
Briar said:
You should call them and inquire if it’s possible to remove escrow from your mortgage.
I did exactly that. My homeowner’s insurance even gave me a $100 discount for paying directly rather than through escrow. The bank required just an additional form stating that I would handle the taxes and insurance myself.
Briar said:
You should call them and inquire if it’s possible to remove escrow from your mortgage.
It’s usually straightforward unless there are specific conditions tied to your loan. Just remember, you’ll need to budget for those tax and insurance bills yourself to avoid any surprises.
We pay our homeowners insurance and property taxes separately. When we secured our mortgage, we explicitly told the underwriter not to include these in our loan, and they complied without issue.
Wylie said:
We pay our homeowners insurance and property taxes separately. When we secured our mortgage, we explicitly told the underwriter not to include these in our loan, and they complied without issue.
I wish I had known to ask about this when I was signing my mortgage agreement. It’s my first time buying a home, so I’m learning as I go.
@Pace
If it was an FHA loan, you might not have had the option to manage your own escrow.
@Pace
Keep in mind, managing your own escrow can sometimes mean a higher interest rate, around 0.25% more, so it’s not always the worst deal to have it included.
@Pace
Escrow requirements often depend on your loan-to-value ratio at the time of the mortgage agreement. If you didn’t put enough money down, the lender likely required escrow.
@Pace
Sometimes removing escrow isn’t an option depending on your loan terms. It’s always worth asking about, though.
Typically, you can request to remove escrow if you’ve got at least 20% equity in your home and have removed PMI.
Zoran said:
Typically, you can request to remove escrow if you’ve got at least 20% equity in your home and have removed PMI.
Be aware that some lenders may still require you to keep PMI even after reaching 20% equity, and similarly, they might not allow you to remove escrow. They prefer to ensure taxes and insurance are paid directly.
@Caden
That’s true, PMI requirements and the ability to remove escrow can vary significantly between lenders.
Zoran said:
@Caden
That’s true, PMI requirements and the ability to remove escrow can vary significantly between lenders.
Even if you reach 20% equity, some lenders enforce PMI for a set period based on the original loan agreement. It’s not always straightforward to remove it early.
@Ellis
In such cases, refinancing might be an option to consider for removing PMI and adjusting escrow requirements.
Zoran said:
@Caden
That’s true, PMI requirements and the ability to remove escrow can vary significantly between lenders.
Correct. For some types of loans, like FHA, PMI might be required for the life of the loan unless you refinance with a different lender.
@Caden
For FHA loans, PMI can’t be removed unless you put down less than 10% at purchase. You would need to refinance to remove it.
@Caden
Exactly, and for conventional loans, PMI removal depends on when you reach the required equity level, which might require a new appraisal.
Tanner said:
@Caden
Exactly, and for conventional loans, PMI removal depends on when you reach the required equity level, which might require a new appraisal.
For conventional loans, PMI can usually be removed once you reach 20% equity based on current home value, not just the purchase price.
In my case, it was as simple as sending a message to my servicer requesting to remove the escrow account, and they processed it without any issues.