On most mortgages you pay into escrow for the full life of the loan, which typically means 15 or 30 years. How long you actually have to pay mortgage escrow depends on your loan type: FHA and USDA borrowers pay for the life of the loan with no way out, while conventional borrowers can usually request removal once they have at least 20% equity and a clean two-year payment history. VA borrowers fall somewhere in between, depending on the servicer.
How Long the Account Stays Open
Your escrow account is set up at closing and remains part of your loan’s servicing agreement. Each month, your servicer collects a portion of your payment to cover property taxes, homeowners insurance, and sometimes flood insurance or mortgage insurance premiums, then pays those bills on your behalf when they come due. The arrangement doesn’t expire on a schedule. It continues until the loan is paid off, the home is sold, or you successfully request removal.
Federal law requires your servicer to review the account at least once a year and send you an annual escrow analysis within 30 days of the end of the computation year.1Consumer Financial Protection Bureau. 12 CFR Part 1024 (Regulation X) – 1024.17 Escrow Accounts That statement shows what was collected, what was paid out, and whether the account has a shortage or surplus that will change your monthly payment going forward.
Whether Your Loan Type Lets You Stop
Removal isn’t a universal right. It’s tied to the kind of mortgage you have.
FHA Loans
If your mortgage is insured by the Federal Housing Administration, escrow is required for the full life of the loan with no waiver option. The lender must collect and pay your property taxes and insurance regardless of how much equity you build. FHA loans allow lower down payments and higher risk profiles, so the government insists on continuous oversight of tax and insurance obligations.
USDA Loans
Lenders servicing USDA-guaranteed rural housing loans must establish escrow accounts for all guaranteed loans.2eCFR. 7 CFR Part 3555 – Guaranteed Rural Housing Program Like FHA loans, the requirement runs for the life of the loan and cannot be waived based on equity.
VA Loans
The Department of Veterans Affairs does not require lenders to maintain escrow accounts on VA-guaranteed mortgages, but it does require that property taxes stay current and hazard insurance remains in place. Most lenders use escrow accounts to satisfy those requirements, so as a practical matter, many VA borrowers still have escrow. If your lender permits it, you may be able to request removal, though policies vary.
Conventional Loans
Conventional loans, meaning those not backed by a government agency, generally allow escrow removal once you meet certain equity and payment history benchmarks. The specific criteria come from the investor guidelines (typically Fannie Mae or Freddie Mac) and your servicer’s own policies. This is the clearest path out of escrow.
What Conventional Borrowers Must Meet to Remove Escrow
Fannie Mae’s servicing guide sets out the conditions your servicer will check. The request must be denied if any of the following apply:
- Your principal balance is 80% or more of the original appraised value of the property.
- You had any late payment within the past 12 months.
- You had a payment 60 or more days late within the past 24 months.
- You received a loan modification, or you previously had an escrow waiver and failed to make all payments on time.
These criteria come directly from Fannie Mae’s servicing requirements.3Fannie Mae. B-1-01, Administering an Escrow Account and Paying Expenses In practice, you need at least 20% equity based on the home’s original appraised value and a clean payment record for two years. Freddie Mac has similar requirements, though its delinquency lookback periods may differ slightly.
These are minimum standards. Your servicer may impose additional requirements and may charge a one-time escrow waiver fee, which can range from nothing to a fraction of a percent of your remaining principal balance. If you have a second mortgage or home equity line of credit, the lender may also factor that into its decision, since additional liens reduce your effective equity cushion.
Escrow Removal Is Not the Same as PMI Cancellation
The two often get confused because both involve reaching 80% loan-to-value, but they’re governed by completely different rules. The Homeowners Protection Act gives you the right to request PMI cancellation at 80% of the original value and requires automatic PMI termination at 78%.4Federal Reserve. Homeowners Protection Act – Compliance Handbook That law says nothing about escrow. Reaching the PMI threshold doesn’t automatically remove escrow; you have to request it separately.
The Five-Year Floor for Higher-Priced Mortgages
If your mortgage was classified as a “higher-priced mortgage loan” at origination, meaning the interest rate exceeded the average prime offer rate by a set margin, a federal regulation imposes a mandatory escrow period. Your servicer cannot cancel the escrow account until at least five years after the loan was finalized, and even then, two conditions still apply: your unpaid principal balance must be below 80% of the original property value, and you must not be delinquent or in default.
The rate thresholds that trigger this classification are 1.5 percentage points above the benchmark for standard first-lien loans, 2.5 points for jumbo first-lien loans, and 3.5 points for loans secured by a subordinate lien.5eCFR. 12 CFR 1026.35 – Requirements for Higher-Priced Mortgage Loans If your loan falls in this category, the five-year floor applies regardless of how quickly you build equity.
How to Ask Your Servicer to Remove It
Start by confirming your current principal balance through your most recent mortgage statement or your servicer’s online portal. Compare that balance to your home’s original appraised value from your closing documents to calculate your loan-to-value ratio. If your principal balance is below 80% of the original value, you likely meet the equity threshold.
Next, contact your servicer and ask for its escrow waiver or removal process. Some have a dedicated form on their website; others require a written request sent by mail. Your request generally needs to include your loan number, a statement that you intend to handle future tax and insurance payments on your own, and confirmation that your account is current. Some servicers may also request a copy of your most recent property tax bill.
In some cases, your servicer may require a new appraisal to verify the property’s current market value, particularly if you’re relying on home appreciation rather than principal paydown to reach the equity threshold. A single-family appraisal typically costs a few hundred dollars, though the price varies by location, property size, and complexity. Plan for a processing period of several weeks after you submit, since the servicer needs to verify your payment history, check for outstanding escrow disbursements, and confirm there are no unresolved shortages.
If the request is denied, your servicer should provide a written explanation identifying which criteria you didn’t meet. You can reapply once you’ve addressed the shortfall, for example after another year of on-time payments or after further principal paydown brings you below the 80% threshold.
What Changes After Escrow Is Gone
Once removal is approved, your monthly mortgage payment drops because it no longer includes the escrow portion. You’ll pay only principal, interest, and any applicable mortgage insurance. Any surplus remaining in the account must be refunded to you within 30 days if it’s $50 or more.1Consumer Financial Protection Bureau. 12 CFR Part 1024 (Regulation X) – 1024.17 Escrow Accounts Smaller surpluses may be refunded or credited to your account.
From that point forward, you’re on your own for property taxes and homeowners insurance. That means tracking due dates, setting money aside throughout the year, and making timely payments. If your home is in a flood zone, note that flood insurance escrow works differently: for mortgages made, extended, or renewed after January 1, 2016 on properties in a Special Flood Hazard Area, federal law generally requires flood insurance premiums to be escrowed for the life of the loan regardless of your equity.6eCFR. 12 CFR 22.5 – Escrow Requirement Removing your regular escrow doesn’t touch that requirement.
The Risk of Force-Placed Insurance
If your lender discovers that your hazard insurance has lapsed after removal, it can buy a policy on your behalf and charge you for it. Force-placed policies can cost anywhere from 1.5 to 10 times more than a standard homeowners policy and typically provide less coverage. Before charging you, your servicer must send two written notices: the first at least 45 days before imposing any charge, and a “final notice” at least 15 days before.7eCFR. 12 CFR 1024.37 – Force-Placed Insurance If you provide proof of coverage before the waiting period expires, the servicer cannot charge you. Even so, a lapse could prompt your servicer to revoke the escrow waiver and reinstate mandatory escrow.