We are about to close on our house and chose not to use an escrow account. The lender agreed but is charging us $879 for this option. Additionally, when we received the loan estimate, this no escrow charge was grouped with our rate buy down charge. We asked why it was listed under point charges instead of as a separate no escrow fee, but our lender got upset and wouldn’t clarify the breakdown on the estimate. The loan amount is $350,000 and the no escrow fee is 0.25% of that. Is it standard practice for this fee to be blended with other charges like this?
Yes, a 0.25% fee to opt out of an escrow account is standard. It’s commonly applied to the loan as a point.
Halston said:
Yes, a 0.25% fee to opt out of an escrow account is standard. It’s commonly applied to the loan as a point.
I understand the fee itself, but why isn’t it itemized separately on the loan estimate? They’ve included it as part of the rate buy down charge.
@Valen
It should indeed be listed under the loan costs section as a point. It’s essentially a fee in the form of a point for waiving the escrow.
Sawyer said:
@Valen
It should indeed be listed under the loan costs section as a point. It’s essentially a fee in the form of a point for waiving the escrow.
So it’s correct that the 0.25% fee for no escrow isn’t itemized separately? The documentation just shows a total of 1.25 points for both the rate buy down and the no escrow fee combined.
@Valen
Exactly, it’s treated like any other loan adjustment fee. It’s just part of the overall points charged.
@Valen
The fee is disclosed when you choose to waive escrows. The risk associated with not having an escrow account justifies the charge.
The fee for waiving the escrow is factored into the rate you’re being charged. It’s accounted for within the points as it affects the rate offered.
Indra said:
The fee for waiving the escrow is factored into the rate you’re being charged. It’s accounted for within the points as it affects the rate offered.
Is there also a fee if you choose to have an escrow account?
@Rai
Having an escrow account usually doesn’t incur a fee because it mitigates risk for the lender by ensuring taxes and insurance are paid.
Zeek said:
@Rai
Having an escrow account usually doesn’t incur a fee because it mitigates risk for the lender by ensuring taxes and insurance are paid.
It seems like a benefit for the lender too since they handle the funds, but primarily it reduces their risk.
@Tory
Exactly, the primary benefit to the lender is the reduced risk, not financial gain from holding the funds.
Indra said:
The fee for waiving the escrow is factored into the rate you’re being charged. It’s accounted for within the points as it affects the rate offered.
That helps clarify, thanks. I was unsure whether to expect the no escrow fee to be listed separately.
Combining all related fees into points is typical as it simplifies the cost structure for both the lender and borrower.
It’s common to see such fees integrated into the points on your loan. This can also be beneficial come tax time.
Oak said:
It’s common to see such fees integrated into the points on your loan. This can also be beneficial come tax time.
Great to know, especially with tax implications. Thanks for the insight!