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Chapter 11. Understanding Escrow Accounts > Canceling Your Escrow Account

Canceling Your Escrow Account

In theory, you should be able to cancel your escrow account at any time. The money in it will be returned to you, your monthly payment will decrease by the amount of the escrow payment, and you’ll have to pay the tax and insurance bills when they come due. In the meanwhile, your money will be earning interest for you.

Unfortunately, it is not always that easy. Banks are well aware that escrow accounts are a source of profit for them. After all, your money and the money of thousands of other mortgage holders, on which they are paying no interest, can be lent out to earn interest for the banks. As a result, many mortgage contracts specify that you cannot cancel your escrow account without paying a fee, and sometimes the fee is quite hefty. You need to check with your mortgage lender to determine the relevant terms for your mortgage. If your mortgage is through a bank with which you have other dealings, you might have more leverage for convincing it to let you cancel the escrow account.


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