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I'm going back and forth for this escrow waiver option. It cost $700 to waive escrows on a 15yr loan and I just cant figure out if it's worth it.
With escrows I get lender credit of $3400 (after origination fee)
with escrows waived $2700
My escrows today are $737 a month. Is it worth waiving it and reducing lender credit by $700?
What are the pros and cons? I know I can use this money elsewhere, but I don't really make any risky investments these days and the interest rate on cds it way too low to even bother.
I don't need this money to live, so the question is more of what's better choice and why.
The pros of not escrowing is you can hold onto your own money. Earn some interest over the year. Today's market you will make next to nothing with it, but when the economy gets back to more normal times you can earn 4,5,6% with some of the online savings accounts such as HSBC.com.
The cons..if you dont save your money, you will run into trouble when taxes come due.
I for one, dont escrow cause i dont need my lender to manage my money.
Also, your lender doesnt have to charge you the escrow waiver fee. I have never charged that fee to any of my clients.
The pros of not escrowing is you can hold onto your own money. Earn some interest over the year. Today's market you will make next to nothing with it, but when the economy gets back to more normal times you can earn 4,5,6% with some of the online savings accounts such as HSBC.com.
The cons..if you dont save your money, you will run into trouble when taxes come due.
I for one, dont escrow cause i dont need my lender to manage my money.
Also, your lender doesnt have to charge you the escrow waiver fee. I have never charged that fee to any of my clients.
Question - I spoke with a few lenders and I don't understand who is charging the escrow waiver fee. Some say "bank doesn't require escrow in your case - your ratio is good, your credit is 800". Other say waiving escrows cost $700 or whatever. Who is not being honest?
I have this one lender I've been talking to who is willing to give me $3400 lender credit with escrows or $2700 with escrows waived (both after origination fee or origination fee of $0 ). That is why I'm debating which is better for me, because $700 is a lot of money.
Another question - how can lender credit be spent in regards to escrows? if I don't have an escrow account with my current lender - will the new lender fund escrow account with all remaining lender credit money (assuming escrow needs more than what's available in lender credit) or is there a limitation?
Also, what if I do have escrow with current lender, do I have any control what happens to this escrow money - whether it gets transferred to a new lender or I get a check and have this new lender fund the escrow account with lender credit?
Here's what I'm after - I want as much lender credit as possible, but I want to make sure it's all used. The way I understand it (and please correct me if I"m wrong) - if I take lender credit of lets say $2700 at expense of .125% it'd take more then 13 years for the bank to recoup this money (because .125% is extra $16 or $17 on my loan). If I decide to do anything with this house within 13 years, I'll end up saving money. So, if I decide to refinance lets say 3 or 6 months later, I'll end up saving a lot on refinance costs. If I take $3400 credit, I don't even understand how lender will make any money on this lender credit???
Does it make sense what I'm doing or there's a big elephant in the room that I don't see?
Thanks
Last edited by Nikon5400; 12-14-2011 at 06:09 AM..
All banks charge a fee to waive escrow. Your loan officer can absorb that fee and make less or can pass that fee along to you. I choose not to pass along that fee as i want to treat my clients equally whether they escrow or dont escrow.
If not escrowing, and you are getting a credit beyond your closing costs it will be applied to your principle balance.
You bring up another reason why i dont escrow. when you escrow, you have no control over that money. If an emergency comes up and you need cash, you cannot access your escrow money. when you refinance with a escrow account, the new lender will set up a new account like you dont have one and your current lender will refund the money in your old account. You cannot move your escrow from one lender to the next.
Dont worry about the lender...they are making plenty off you. Any lender credit will be used in total.
. Your loan officer can absorb that fee and make less or can pass that fee along to you. I choose not to pass along that fee as i want to treat my clients equally whether they escrow or dont escrow.
If not escrowing, and you are getting a credit beyond your closing costs it will be applied to your principle balance.
You bring up another reason why i dont escrow. when you escrow, you have no control over that money. If an emergency comes up and you need cash, you cannot access your escrow money. when you refinance with a escrow account, the new lender will set up a new account like you dont have one and your current lender will refund the money in your old account. You cannot move your escrow from one lender to the next.
Dont worry about the lender...they are making plenty off you. Any lender credit will be used in total.
"All banks charge a fee to waive escrow"
I used to think the same until we became a direct seller to Freddie Mac. It is not a Fannie/Freddie fee. It is an investor fee. At this time I do not charge .25 to waive escrow as it is not a "hit" with Freddie.
I am refinancing and my bank charges a fee to waive escrow. However, why don't you do what I am doing - go ahead and have the bank set up escrow for you and then call to cancel the escrow later on?
You are ALWAYS free to cancel the escrow once the loan payments have begun. This is what I am planning to do - once my first payment is due in February or March - I will call the lender/servicer and ask that escrow be removed. From that point, I will be paying taxes on my own.
I was told I can do this and the bank wont charge a fee if I cancel escrow once the loan starts.
I am refinancing and my bank charges a fee to waive escrow. However, why don't you do what I am doing - go ahead and have the bank set up escrow for you and then call to cancel the escrow later on?
You are ALWAYS free to cancel the escrow once the loan payments have begun. This is what I am planning to do - once my first payment is due in February or March - I will call the lender/servicer and ask that escrow be removed. From that point, I will be paying taxes on my own.
I was told I can do this and the bank wont charge a fee if I cancel escrow once the loan starts.
Good luck on getting your bank to cancel it. Think about..they charge a fee to waive escrow, but then let you cancel it with no fee after loan is done?
Good luck on getting your bank to cancel it. Think about..they charge a fee to waive escrow, but then let you cancel it with no fee after loan is done?
I used to think the same until we became a direct seller to Freddie Mac. It is not a Fannie/Freddie fee. It is an investor fee. At this time I do not charge .25 to waive escrow as it is not a "hit" with Freddie.
thanks for correcting me...i dont sell direct but i know a few that do and they dont have that fee.
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