When purchasing a home, one decision that often arises is whether to waive escrow impounds. Escrow impounds are funds collected with your monthly mortgage payment to cover property taxes and insurance. While waiving escrow impounds may seem appealing to some homeowners, there are important factors to consider before making this decision.
Pros of waiving escrow impounds:
– Can provide more control over your own money
– May lead to lower monthly mortgage payments
– Could earn interest on funds that would typically be held in escrow
Cons of waiving escrow impounds:
– Requires discipline to save for property taxes and insurance
– Risk of not having enough funds when payments are due
– Lenders may charge a higher interest rate for waiving escrow impounds
Before deciding whether to waive escrow impounds, consider your financial situation, responsibility, and comfort level with managing these expenses on your own. Now, let’s address some common questions related to this topic.
1. What are escrow impounds?
Escrow impounds are funds collected by the lender with your monthly mortgage payment to cover property taxes and insurance payments.
2. How do escrow impounds work?
The lender sets aside a portion of your monthly mortgage payment into an escrow account to cover future property tax and insurance bills.
3. Can I waive escrow impounds?
Yes, some lenders allow borrowers to waive escrow impounds if they meet certain criteria.
4. What are the potential risks of waiving escrow impounds?
The main risk of waiving escrow impounds is the possibility of not having enough funds to cover property tax and insurance payments when they are due.
5. Are there any benefits to waiving escrow impounds?
Waiving escrow impounds can give borrowers more control over their own funds and potentially lead to lower monthly mortgage payments.
6. How do I know if I should waive escrow impounds?
Consider your financial situation, responsibility, and comfort level with managing property taxes and insurance payments on your own before deciding to waive escrow impounds.
7. Can I reinstate escrow impounds if I waive them initially?
In some cases, lenders allow borrowers to reinstate escrow impounds at a later time if they choose to do so.
8. Will waiving escrow impounds affect my mortgage interest rate?
Some lenders may charge a higher interest rate for borrowers who choose to waive escrow impounds.
9. How can I save for property taxes and insurance if I waive escrow impounds?
Borrowers who waive escrow impounds will need to set up their own savings plan to ensure they have enough funds to cover property tax and insurance payments.
10. Are there any additional fees associated with waiving escrow impounds?
Some lenders may charge a fee for borrowers who choose to waive escrow impounds.
11. Can I switch from waiving escrow impounds to having them later?
Borrowers may have the option to switch from waiving escrow impounds to having them at a later time, depending on the lender’s policies.
12. How do I request to waive escrow impounds?
If you want to waive escrow impounds, speak with your lender and inquire about their specific requirements and process for doing so.