What To Expect With An Escrow Refund (2024)

Escrow refunds can occur in a variety of situations. Although the details will vary based on your particular situation, here are a few instances in which you might be eligible for an escrow refund.

• Paid off mortgage completely: If you have a remaining balance in your escrow account after you pay off your mortgage, you will be eligible for an escrow refund of the remaining balance. Servicers should return the remaining balance of your escrow account within 20 days after you pay off your mortgage in full.

• Lowered tax bills: Tax bills may change on a year-to-year basis. If your property tax bill is lowered, there is a chance you’ll receive an escrow refund.

• Insurance companies changed for a better rate: If you are able to switch up your homeowners insurance for a better rate, then you might be eligible for an escrow refund. When switching homeowners insurance policies, you’ll want to contact your servicer. They’ll need to know about your new policy. You should also know that homeowners insurance policies are paid in advance, so if you don’t send your refund check from the previous carrier back to your servicer, you’ll likely end up with an escrow shortage because you’ll have paid out of that account for two separate policies. You’ll want to make an escrow-only payment in the amount of the refund to avoid shortage.

• Overpayment when purchased: If you made a larger than necessary upfront payment at closing, then you may receive an escrow refund.

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.

What Is A Refinance Escrow Refund?

When you refinance your mortgage, you may be able to tap into a lower monthly payment. That decision could result in an escrow refund.

If you are refinancing your mortgage with your current lender, then your escrow account may remain intact. That means that the funds you have in your account before the refinance will remain in the original escrow account. With that, you shouldn’t expect to receive an escrow refund unless the property taxes or insurance associated with your property have changed dramatically.

However, things change if you are refinancing with a different lender. When you complete the refinance with a new lender, the new loan servicer will create a new escrow account for you. With that, your original escrow account will be closed. If the original escrow account is closed, then you should receive a check for the remaining balance.

What Is An Escrow Balance Refund?

An escrow balance refund is a check for the entire remaining balance in your escrow account. Essentially, this is an escrow refund, but instead of receiving a portion of the balance, you will receive the entire balance remaining in your account.

This transaction can come into play if you’ve paid off your mortgage and there is still a balance in your escrow account.