Escrow waiver fee...

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Ed_Sandwich
Posts: 185
Joined: Mon Mar 20, 2017 12:47 pm

Escrow waiver fee...

Post by Ed_Sandwich »

My previous home had a mortgage held by Chase, and I removed the escrow after a few years because I liked the control of paying T&I myself. There was no fee associated with waiving escrow with Chase (this was 5+ years ago).

The mortgage on my new home is held by USBank and I have inquired about waiving escrow with them. Unfortunately they charge a fee of 0.25% of the mortgage balance in order to remove it. This is a big number, over $1,500. As disappointing as that is, I'm still struggling with the decision.

I plan to stay in this house 10+ years, and I don't earn interest on my escrow account. I feel like it may not take much time for the fee to pay for itself. But it also is a bitter pill to swallow up front, and the mortgage could always change hands, and end up somewhere that charges no fee.

What would you do if you were me?
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8foot7
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Re: Escrow waiver fee...

Post by 8foot7 »

Leave it. Not that big of a deal.
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anon_investor
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Re: Escrow waiver fee...

Post by anon_investor »

Ed_Sandwich wrote: Fri Jan 21, 2022 8:02 am My previous home had a mortgage held by Chase, and I removed the escrow after a few years because I liked the control of paying T&I myself. There was no fee associated with waiving escrow with Chase (this was 5+ years ago).

The mortgage on my new home is held by USBank and I have inquired about waiving escrow with them. Unfortunately they charge a fee of 0.25% of the mortgage balance in order to remove it. This is a big number, over $1,500. As disappointing as that is, I'm still struggling with the decision.

I plan to stay in this house 10+ years, and I don't earn interest on my escrow account. I feel like it may not take much time for the fee to pay for itself. But it also is a bitter pill to swallow up front, and the mortgage could always change hands, and end up somewhere that charges no fee.

What would you do if you were me?
How do you plan to recoup the $1,500?
bsteiner
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Re: Escrow waiver fee...

Post by bsteiner »

It varies from one bank to another, and from time to time within the same bank. A few insisted on it. I was able to negotiate with one to waive it. ON a later occasion that one wanted 0.25% to waive it, but I was able to negotiate it down to 0.125%.

You are correct that whether they pay interest on it is a factor. Some states require them to pay interest on it, and some don't.
MrJedi
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Re: Escrow waiver fee...

Post by MrJedi »

After 1 year or so you can request to close the escrow with no fee. Many lenders/servicers will allow this once you have a history of timely payments. Ask your lender what their policy about closing it at a future time.
Topic Author
Ed_Sandwich
Posts: 185
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Re: Escrow waiver fee...

Post by Ed_Sandwich »

anon_investor wrote: Fri Jan 21, 2022 9:05 am
Ed_Sandwich wrote: Fri Jan 21, 2022 8:02 am My previous home had a mortgage held by Chase, and I removed the escrow after a few years because I liked the control of paying T&I myself. There was no fee associated with waiving escrow with Chase (this was 5+ years ago).

The mortgage on my new home is held by USBank and I have inquired about waiving escrow with them. Unfortunately they charge a fee of 0.25% of the mortgage balance in order to remove it. This is a big number, over $1,500. As disappointing as that is, I'm still struggling with the decision.

I plan to stay in this house 10+ years, and I don't earn interest on my escrow account. I feel like it may not take much time for the fee to pay for itself. But it also is a bitter pill to swallow up front, and the mortgage could always change hands, and end up somewhere that charges no fee.

What would you do if you were me?
How do you plan to recoup the $1,500?
It seems that if I invested the money in the interim periods between the bills, I could make it back pretty quickly, say less than 5 years. In my savings account it would take about 8 years.
Goal33
Posts: 2004
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Re: Escrow waiver fee...

Post by Goal33 »

I paid around $150 more for my $750k mortgage to opt out of escrow at origination. Felt that was a good deal but pretty much my limit.
Topic Author
Ed_Sandwich
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Re: Escrow waiver fee...

Post by Ed_Sandwich »

MrJedi wrote: Fri Jan 21, 2022 10:01 am After 1 year or so you can request to close the escrow with no fee. Many lenders/servicers will allow this once you have a history of timely payments. Ask your lender what their policy about closing it at a future time.
Unfortunately, I had to wait 6+ months of payments to be able to request, and I don't think the fee ever goes away with USBank. They were pretty clear when I spoke with them, though I could try again.
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anon_investor
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Re: Escrow waiver fee...

Post by anon_investor »

Ed_Sandwich wrote: Fri Jan 21, 2022 10:03 am
anon_investor wrote: Fri Jan 21, 2022 9:05 am
Ed_Sandwich wrote: Fri Jan 21, 2022 8:02 am My previous home had a mortgage held by Chase, and I removed the escrow after a few years because I liked the control of paying T&I myself. There was no fee associated with waiving escrow with Chase (this was 5+ years ago).

The mortgage on my new home is held by USBank and I have inquired about waiving escrow with them. Unfortunately they charge a fee of 0.25% of the mortgage balance in order to remove it. This is a big number, over $1,500. As disappointing as that is, I'm still struggling with the decision.

I plan to stay in this house 10+ years, and I don't earn interest on my escrow account. I feel like it may not take much time for the fee to pay for itself. But it also is a bitter pill to swallow up front, and the mortgage could always change hands, and end up somewhere that charges no fee.

What would you do if you were me?
How do you plan to recoup the $1,500?
It seems that if I invested the money in the interim periods between the bills, I could make it back pretty quickly, say less than 5 years. In my savings account it would take about 8 years.
How big is your escrow and what kind of safe investment can net that much?
MrJedi
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Re: Escrow waiver fee...

Post by MrJedi »

Ed_Sandwich wrote: Fri Jan 21, 2022 10:12 am
MrJedi wrote: Fri Jan 21, 2022 10:01 am After 1 year or so you can request to close the escrow with no fee. Many lenders/servicers will allow this once you have a history of timely payments. Ask your lender what their policy about closing it at a future time.
Unfortunately, I had to wait 6+ months of payments to be able to request, and I don't think the fee ever goes away with USBank. They were pretty clear when I spoke with them, though I could try again.
That's a bummer. A more extreme approach, not necessarily recommended, is to refinance with a lender who will waive it more easily without a fee. With the recent uptick in interest rates though it may not be favorable anymore.

Personally I would have a hard time paying the fee and probably just keep the escrow.
nrkv
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Re: Escrow waiver fee...

Post by nrkv »

Ed_Sandwich wrote: Fri Jan 21, 2022 10:12 am
MrJedi wrote: Fri Jan 21, 2022 10:01 am After 1 year or so you can request to close the escrow with no fee. Many lenders/servicers will allow this once you have a history of timely payments. Ask your lender what their policy about closing it at a future time.
Unfortunately, I had to wait 6+ months of payments to be able to request, and I don't think the fee ever goes away with USBank. They were pretty clear when I spoke with them, though I could try again.
Yes, I was not able to have them reduce the percentage. You only get the least accountable persons on their customer service phone that only reads from the documents that are available online. Waiving the insurance part only will cost 0.125% of mortgage.

For me the problem was that the usbank kept paying whatever bills that come their way. My insurance company increased prices mid year, usbank paid it before I can even talk to the company. When I switched to another insurance, usbank paid them too. It’s a lot of paperwork, phone calls to sort out anything with usbank. I don’t have much left in mortgage, so I paid 0.25% and came out of escrow. That process itself took from June to October last year again with multiple phone calls and emails.

As others have mentioned, you may be better off refinancing and negotiating a non-escrow with new bank.
Turtlemilk
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Re: Escrow waiver fee...

Post by Turtlemilk »

My mortgage lender said they were unable to waive the escrow fee, but offered a .25 credit to offset the .25 waiver charge.
LittleMaggieMae
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Re: Escrow waiver fee...

Post by LittleMaggieMae »

Ed_Sandwich wrote: Fri Jan 21, 2022 10:03 am
It seems that if I invested the money in the interim periods between the bills, I could make it back pretty quickly, say less than 5 years. In my savings account it would take about 8 years.
Rhetorical questions: I don't really need to know the answers but they seem like things to consider:
Do you really want to risk actually having the amount you need to pay your tax/insurance when the bills come due? How much will it cost to sell the investment (and taxes on that money)?

Is your property tax payment on a once a year payment OR some other schedule (2 times a year or maybe monthly??) What about the payment schedule for your insurance?

Do you plan to just dump a big lump sum (the total for the year) into investments and then pull the $$ once or twice a year? Or do you need to accumulate the payments from your paychecks over the course of the year? Will your 'sinking fund" aka the invested money go from Big Amount once a year to 0.00 once a year and then rinse and repeat yearly? Or will you DCA monthly payments to it from your paycheck - so 0.00 slowly growing to Big Amount and then returning to 0.00 when you pay the bills?


I have high property tax (paid twice a year) and insurance paid once a year. I use a HYSA as a "sinking fund" with 1/12th of the total expense going into it monthly. I cannot cash flow property tax or insurance from my paycheck when they are due. Because of when the bills are due - I typically have only 1/2 of the total yearly amount in the "sinking fund" at any time...
I do not feel comfortable investing this money as I don't want to have to deal with the emotional ups/downs of worrying if I will have enough to pay the bills when they come due.
lazynovice
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Location: Denver area. Former Texan.

Re: Escrow waiver fee...

Post by lazynovice »

Is it too late to go with another lender?
guitarguy
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Re: Escrow waiver fee...

Post by guitarguy »

I never knew about them charging a fee for this.

I find it to be total BS!!!

We have PenFed for our mortgage and opted out of escrow when refi’d to a 15-yr for no fee (as far as I can remember).

When we purchase our next home I hope to go straight to them for financing and bypass the risks of letting my mortgage go to somewhere unknown and end up with a crap company to work with.
Golf maniac
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Re: Escrow waiver fee...

Post by Golf maniac »

guitarguy wrote: Sat Jan 22, 2022 11:17 am I never knew about them charging a fee for this.

I find it to be total BS!!!

We have PenFed for our mortgage and opted out of escrow when refi’d to a 15-yr for no fee (as far as I can remember).

When we purchase our next home I hope to go straight to them for financing and bypass the risks of letting my mortgage go to somewhere unknown and end up with a crap company to work with.
This OP has an existing escrow account, it is not a refinance. What happens on a refinance is you pay a slightly higher rate if you do not allow an escrow account. The servicer obviously makes money on your and all the other mortgage escrows. If they don’t have those funds they charge a little bit more.

For the OP calculate the dollar amount of the charge to remove it and then determine how long it would take to make up that fee in interest earned on the funds. If you are planning on moving or refinancing before the funds are recovered do not do it.
guitarguy
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Re: Escrow waiver fee...

Post by guitarguy »

Golf maniac wrote: Sat Jan 22, 2022 1:41 pm
guitarguy wrote: Sat Jan 22, 2022 11:17 am I never knew about them charging a fee for this.

I find it to be total BS!!!

We have PenFed for our mortgage and opted out of escrow when refi’d to a 15-yr for no fee (as far as I can remember).

When we purchase our next home I hope to go straight to them for financing and bypass the risks of letting my mortgage go to somewhere unknown and end up with a crap company to work with.
This OP has an existing escrow account, it is not a refinance. What happens on a refinance is you pay a slightly higher rate if you do not allow an escrow account. The servicer obviously makes money on your and all the other mortgage escrows. If they don’t have those funds they charge a little bit more.
I don’t recall any discussion of paying a higher rate. We just checked the opt out of escrow box and that was that. From my memory anyway…and I’m a stickler for details so I feel like I would’ve remembered this if it was discussed.

I imagine it can vary between lenders.
Hypersion
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Re: Escrow waiver fee...

Post by Hypersion »

What state are you in? In California the minimum rate on escrow is much higher than any money market.
Golf maniac
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Location: Florida

Re: Escrow waiver fee...

Post by Golf maniac »

guitarguy wrote: Sat Jan 22, 2022 3:57 pm
Golf maniac wrote: Sat Jan 22, 2022 1:41 pm
guitarguy wrote: Sat Jan 22, 2022 11:17 am I never knew about them charging a fee for this.

I find it to be total BS!!!

We have PenFed for our mortgage and opted out of escrow when refi’d to a 15-yr for no fee (as far as I can remember).

When we purchase our next home I hope to go straight to them for financing and bypass the risks of letting my mortgage go to somewhere unknown and end up with a crap company to work with.
This OP has an existing escrow account, it is not a refinance. What happens on a refinance is you pay a slightly higher rate if you do not allow an escrow account. The servicer obviously makes money on your and all the other mortgage escrows. If they don’t have those funds they charge a little bit more.
I don’t recall any discussion of paying a higher rate. We just checked the opt out of escrow box and that was that. From my memory anyway…and I’m a stickler for details so I feel like I would’ve remembered this if it was discussed.

I imagine it can vary between lenders.
When you checked the opt out you got the higher rate. Some lenders increase the closing costs and others bump the rate up slightly. But if you don’t have escrow you pay more.
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