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Fee to Waive Escrow?
Old 08-28-2020, 06:57 AM   #1
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Fee to Waive Escrow?

Is anyone here paying a fee to waive escrow?

Helping a family member to refinance and she was offered a no escrow option which cost 1/8% higher rate on her loan. I told her to find another mortgage company. I know many here including myself don’t pay escrow for various reasons. In my case our property taxes and insurance are very high so it would be like an interest free loan to the escrow company. Haven’t paid escrow for over 20 years now and never paid any fee to do so. I know some may find it convenient to have the mortgage company make tax and insurance payments. Some lenders view a non escrow loan as higher risk.
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Old 08-28-2020, 07:05 AM   #2
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+1 I've never paid to not have escrow and would not do so... and 1/8% is crazy... that's $300 in the first year on a $300k home with an 80% LTV ratio (actually a hair less due to principal amortization but you get the idea).
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Old 08-28-2020, 07:07 AM   #3
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yeah that's nuts
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Old 08-28-2020, 07:08 AM   #4
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My last house loan I opted out of escrow and they charged me a few hundred dollars, they claimed it was because they had to check every year that I paid them.
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Old 08-28-2020, 07:11 AM   #5
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I wonder if she misinterpreted what they were telling her and that it as a one-time charge of 1/8% of the loan amount rather than a 1/8% increase in the loan interest rate?

That might make more sense.
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Old 08-28-2020, 07:24 AM   #6
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Have always gone with no escrow but never paid any sort of fee for that option.
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Old 08-28-2020, 07:51 AM   #7
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Everything is negotiable. Ask to have the fee waived.
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Old 08-28-2020, 08:24 AM   #8
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Are they putting at least 20% down? IIRC, that was a requirement for no escrow, at least in IL. They may need to pay to do it at a lower % down.


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Old 08-28-2020, 09:16 AM   #9
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DD is in the process of buying her first house. She's using a local credit union. They do not charge any fee, nor higher interest rate, to waive escrow requirements on a conventional mortgage (20%+ down). Also, their origination fee is a fixed $800 and other closing costs are very reasonable. Just yesterday, she locked in at 2.625% fixed for 30 years (no points), which is an amazing rate.

Last time we originated a mortgage (2004), they charged a small fee (~$400, IIRC) at closing to waive escrow. I tried to negotiate it to zero, but they would not budge. Only other option was a slightly higher rate. This was a mortgage broker recommended by our agent. I should have known better. But the rate was quite good so we paid the fee.

Credit unions seem to be the best option for mortgages these days. Great rates, low costs, no nonsense like escrow waiver fees. In DD's case, they also service all their mortgages.
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Old 08-28-2020, 09:56 AM   #10
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Quote:
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yeah that's nuts
Depends whether you're buying or selling.
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Old 08-28-2020, 10:01 AM   #11
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Quote:
Originally Posted by Cobra9777 View Post

Last time we originated a mortgage (2004), they charged a small fee (~$400, IIRC) at closing to waive escrow. I tried to negotiate it to zero, but they would not budge. .

I also remember something similar. We had to pay a few hundred and they wouldn’t waive it. Worth it over the long run not to have them earn interest on the cash. But very annoying. Mine was Chase Mortgage.
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Old 08-28-2020, 10:06 AM   #12
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Our credit union gives you an 1/8th of a point interest rate cut IF you agree to escrow, if you don't then you don't get the discount. Then the question is, is that 1/8th of a point interest rate cut worth more than the interest you would earn on that money, yep, worth WAY more so yeh I escrow.
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Old 08-28-2020, 10:09 AM   #13
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Quote:
Originally Posted by ERD50 View Post
Are they putting at least 20% down? IIRC, that was a requirement for no escrow, at least in IL. They may need to pay to do it at a lower % down.

-ERD50
+1
Or they can put down a higher amount to avoid the escrow.
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Old 08-28-2020, 11:46 AM   #14
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Originally Posted by pb4uski View Post
I wonder if she misinterpreted what they were telling her and that it as a one-time charge of 1/8% of the loan amount rather than a 1/8% increase in the loan interest rate?

That might make more sense.
That is entirely possible. She lost her husband recently and she's never really been involved in their finances. Thanks to everyone for suggestions that I can pursue. It's a refi and I assumed they had at least 20% equity.
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