If you refinance your mortgage, you may be able to get a lower interest rate and lower your monthly payments. But did you know that you may also be able to get an escrow refund? This is the extra money that will be in your escrow account after the refinance closes.
In this detailed guide, we’ll explain what an escrow refund is, when to expect it, and how to make sure you get the full refund you deserve.
What is an Escrow Account?
First, let’s quickly review what an escrow account is. You may have to pay extra each month to your mortgage lender to cover property taxes and homeowner’s insurance. This part of your payment goes into an escrow account that your loan servicer manages.
When annual bills for taxes and insurance come due, the servicer pays them from your escrow funds. This ensures these big periodic payments are made on time.
Your servicer reviews the escrow account annually to see if your monthly escrow payment needs adjusting based on changes in your tax and insurance costs.
Why Do You Get an Escrow Refund After Refinancing?
There are a few common reasons a surplus can build up in your escrow account when you refinance:
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If your property taxes or insurance premiums have gone down since your last refinance, your escrow account will now get more money than it needs to pay the bills.
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Overpayment at closing: If you paid more than what was required at closing, the extra money may have been put into your escrow account.
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Change in escrow requirements: Your new lender may have lower escrow payment requirements than your previous servicer, leaving excess funds.
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Timing of payments: Depending on timing, you may have already paid some tax and insurance bills right before refinancing that your new lender replenishes.
When Should You Expect an Escrow Refund Check?
The timeline for receiving a refinance escrow refund check can vary:
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Same lender: With no servicer change, your existing escrow account will just transfer to the new loan. Don’t expect a refund unless your tax and insurance costs changed significantly.
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New lender: Your old escrow account will close and any surplus balance should be returned to you via check within 20 days.
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Small vs. large refunds: A larger refund may take more time to process and clear. Expect smaller amounts faster.
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Annual analysis: The fastest refunds come after the servicer’s yearly analysis, typically done within a month of your account anniversary date. Refunds at other times may take longer.
Overall, you can reasonably expect your escrow refund check within 1-2 billing cycles after refinancing, likely 30-60 days. But check with your specific servicer for their timeline.
How to Make Sure You Get Your Full Refund
Here are some tips to ensure you receive the entire escrow refund amount you deserve:
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Review the escrow analysis statements from your previous servicer to confirm your old account balance.
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When you close, request written verification of your escrow account transfer and refund.
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Follow up with both servicers if you don’t receive the refund check within 60 days.
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Ask your new servicer to explain any discrepancies if the check amount seems too low.
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Submit written complaints to servicers who wrongly withhold escrow surpluses after confirmed account transfers.
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Contact regulators if servicers violate escrow account rules or refund policies.
Can You Get an Escrow Refund Without Refinancing?
Escrow refunds aren’t limited only to refinancing scenarios. Any major drop in your tax or insurance obligations can leave excess escrow cash and trigger a refund. For example:
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Your yearly property tax assessment drops, lowering your tax bill.
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You qualify for a homestead exemption, elderly discount, or other tax break.
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You find a much cheaper homeowners insurance policy.
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You pay off your mortgage, closing the escrow account.
In these cases, stay on top of your escrow statements and request a refund of any growing surplus. Don’t let your servicer pocket the difference!
The Bottom Line
While not guaranteed, an escrow refund after refinancing or lowering your tax and insurance costs can give your budget a nice boost. Monitor your account closely, know the right timeframes, and follow up diligently to get back every dollar you’re owed. With a little luck, you’ll have some extra cash to put towards other financial goals!
What is an escrow refund?
An escrow refund occurs when your escrow account contains excess funds and you receive a check in the amount of any remaining balances.
Importantly, you may not be eligible for an escrow refund unless the remaining balance is at least $50. If the escrow account has a surplus of less than $50 at the time of the annual escrow account analysis, then the loan servicer has the option to refund the excess. But the loan servicer could choose to apply the excess against the next year’s escrow payments instead.
However, if there is surplus in the escrow account after you finish paying off the loan, you will be entitled to an escrow refund regardless of the amount.
What Are Escrow Refund Checks?
An escrow refund check will reflect the amount of excess funds in your escrow account.
If you are eligible for an escrow refund check, the loan servicer will most likely issue a check after its required annual escrow account analysis. The timing can be any month of the year, but during this review loan servicers check that your escrow payments match up with the bills paid out of this account.
For example, let’s say that your property tax bill was lowered in July. Since then, you’ve consistently paid your entire mortgage payment. With that, you should have extra funds in your escrow account when an annual escrow account analysis is conducted in December. At that point, the loan servicer may issue a refund check. However, it is possible that you’ll need to make a request to receive the refund check. Finally, you have to be current on your mortgage to receive the refund.
Why do most lenders advertise an escrow refund when you refinance?
FAQ
Do you get escrow money back after refinancing?
… insurance payments you have made to that account, since the last payment was made, will be returned to you, usually within 45 days via wire transfer or checkMay 18, 2021.
How long does it take to get an escrow refund?
Generally, you can expect an escrow refund within 20 to 30 days, depending on the situation. If you pay off your mortgage in full, the lender typically has 20 days (excluding weekends and holidays) to return any remaining escrow balance, according to federal regulations.
Do you get escrow money back at closing?
Generally, yes, you can get some escrow money back at closing, but it depends on the specific circumstances. If you’ve paid off your mortgage or refinanced, and there’s money left in your escrow account after all obligations are settled, you will receive a refund.
Do I get money back when I refinance my house?