You can remove the escrow account from your mortgage on most conventional loans once your balance drops below 80 percent of the home’s original value and your payment history is clean. FHA loans generally do not allow it. VA loans and higher-priced mortgage loans have their own rules. The mechanics are the same either way: contact your loan servicer, meet the eligibility requirements, and pay a one-time waiver fee if one applies.
Check Whether Your Loan Type Allows It
Loan type decides more than anything else whether a waiver is on the table.
Conventional Loans
Conventional loans give you the most room. Most servicers set the threshold at a loan-to-value ratio of 80 percent or less, meaning your remaining balance is no more than 80 percent of the home’s original appraised value. Fannie Mae, which backs a large share of conventional mortgages, requires servicers to have a written escrow-waiver policy and specifies that the decision cannot rest on the loan-to-value ratio alone. The lender must also weigh whether you can handle lump-sum tax and insurance bills on your own.1Fannie Mae. Escrow Accounts Most lenders also want no late payments in the past 12 months and a loan that has been active for at least one year.
FHA Loans
FHA loans require an escrow account for the life of the loan. If you want to manage tax and insurance payments yourself, refinancing into a conventional loan is the only realistic route, which means qualifying under conventional underwriting standards and paying closing costs.
VA Loans
VA loans allow escrow waivers with a lower equity bar. Borrowers generally need just 5 percent equity (a 95 percent loan-to-value ratio) and a minimum credit score around 620, though individual servicers may impose tighter requirements. You also cannot have recent delinquencies or a tax payment due within the next 45 days.
Higher-Priced Mortgage Loans
If your mortgage was classified as a higher-priced mortgage loan at origination, meaning the interest rate exceeded a benchmark threshold set by federal regulators, the escrow account must stay in place for at least five years. After that, you can request cancellation only if your unpaid balance has fallen below 80 percent of the home’s original value and you are not currently delinquent.2Consumer Financial Protection Bureau. TILA Higher-Priced Mortgage Loans Escrow Rule – Small Entity Compliance Guide If either condition is unmet, the servicer must keep the escrow account open beyond five years.
Watch for Flood Zones and Servicer Discretion
Even if your loan and equity qualify you, federal law may still require your servicer to escrow flood insurance. If your home sits in a Special Flood Hazard Area, your lender must collect flood insurance premiums through escrow for the entire life of the loan, regardless of your loan-to-value ratio.3Office of the Law Revision Counsel. 42 USC 4012a – Flood Insurance Purchase and Compliance Requirements and Escrow Accounts Narrow exceptions exist for some smaller lenders, HELOCs, and condos where the association carries the flood policy, but for most homeowners in flood zones this requirement is permanent.
Fannie Mae also recommends that servicers keep escrow accounts open for first-time homeowners and borrowers with blemished credit, even when a waiver would otherwise be available.1Fannie Mae. Escrow Accounts Your servicer has discretion to deny a waiver on these grounds even if you meet the equity and payment-history thresholds.
Expect a One-Time Waiver Fee
Many lenders charge a one-time escrow waiver fee, typically 0.25 percent of the loan amount. On a $300,000 mortgage, that comes to $750. Not every lender charges it, and some adjust based on credit or equity. Ask your servicer upfront whether a fee applies and how it is collected, since the answer varies.
Gather Documentation and Submit the Request
Before contacting your servicer, pull together a few things:
- Your mortgage account number and current balance, both on your most recent monthly statement.
- A property valuation. Your servicer may accept the original appraised value or require an updated one. A broker price opinion typically runs $100 to $250; a full professional appraisal runs roughly $300 to $600 for a standard single-family home, with higher fees for larger or more complex properties.
- Your payment history. Confirm no late payments in the past 12 months. The servicer will verify this independently, but checking first avoids surprises.
Most servicers offer a specific escrow waiver request form through their online portal. The form asks for contact information, account details, the reason for the request, and any updated property valuation. If your servicer does not have a form, write a letter that references your loan number, states your request to cancel the escrow account, and includes your equity position.
You generally have three ways to submit. The online portal is fastest and gives you an instant timestamp. Certified mail with return receipt requested serves as proof of delivery if the servicer later claims it never arrived. Some servicers still accept faxed requests, in which case you should print and save the confirmation page.
Keep a complete copy of everything you send. Follow up by phone about five business days later to confirm the request has been logged and assigned for review. If any documents are missing, you can re-submit from your copies rather than starting over.
What Happens After You Submit
The review generally takes 30 to 60 days. Your servicer will verify your equity, pull your payment history, confirm there are no outstanding liens, and check that your loan type permits a waiver. If approved, you will receive a written notice confirming that you are now responsible for paying property taxes and homeowners insurance directly.
Getting Your Escrow Balance Back
Any money left in your escrow account after pending disbursements will be returned to you. Federal regulations set a 20-business-day refund window when a loan is paid in full.4Consumer Financial Protection Bureau. 12 CFR 1024.34 – Timely Escrow Payments and Treatment of Escrow Account Balances For a mid-loan cancellation, the timeline depends on your servicer, but most process the refund within 30 days of account closure.
Your New Payment Responsibilities
Once the escrow account closes, your monthly payment drops to principal and interest, plus any mortgage insurance. That savings is not free money. You now pay property taxes and homeowners insurance yourself, directly to the taxing authority and your insurance carrier.
Property tax bills typically arrive once or twice a year, and homeowners insurance premiums are usually due annually. Missing these deadlines carries real consequences. If your insurance lapses, your servicer is required to purchase force-placed coverage on your behalf, which can cost two to three times more than a standard policy and provides less coverage.5eCFR. 12 CFR 1024.37 – Force-Placed Insurance Unpaid property taxes can lead to tax liens that take priority over your mortgage, and in extreme cases either problem could trigger a default under your mortgage contract.
Tracking Tax Payments at Tax Time
When your lender handles escrow, it reports the property taxes paid on your behalf on Form 1098, which makes claiming the deduction straightforward. Once you pay taxes directly, that automatic reporting goes away. The IRS expects you to keep receipts, canceled checks, or similar proof of the amounts paid.6Internal Revenue Service. Tax Information for Homeowners Save your county tax bill and payment confirmation each year in case the IRS asks.
If Your Request Is Denied
If your servicer denies the request, the denial letter should explain why. The most common reasons are insufficient equity, recent late payments, or a loan type that does not permit waivers. For equity shortfalls, you can request a new appraisal if you think your home’s value has risen enough to bring you below the 80 percent threshold. For payment-history issues, you will generally need a full 12 months of on-time payments before reapplying. If you have an FHA loan and the denial is based on loan type, refinancing into a conventional mortgage is the only path forward.