Can You Opt Out of Escrow?

Can You Opt Out of Escrow? gives you a clear, step-by-step way to understand what drives your bill, what to verify on your notice, and what to do if the numbers look off.

Not every mortgage requires escrow. It depends on lender policy, loan type, and down payment. FHA and VA loans always require escrow. Conventional loans often require escrow if you made a small down payment or are not paying Mortgage Insurance separately. Check your mortgage agreement or ask your servicer. If you strongly prefer paying taxes yourself (and qualify, often by keeping a large cash reserve), some lenders may allow waiver of escrow. Pros of Waiving Escrow: - You control your tax payments directly. - You earn any interest on the money until the tax is due. Cons: - You must be disciplined to save for taxes/insurance. - Missing a payment can trigger

penalties or even loan default (some mortgages forbid lapses in escrow payments). If escrow-free and you still have a mortgage, set up your own “tax fund” savings. Treat it like another bill – put aside 1/12th of your annual tax each month. What to Do If Your Tax Assessment Changes If your property’s assessed value suddenly jumps (and taxes rise), your lender will adjust your escrow. You’ll get a new analysis showing the higher taxes. You might see a shortage. Options: - One-Time Payment: Make a lump sum to fill the gap. This keeps your monthly payments lower. - Increased Monthly Payment: Roll the shortage into your monthly payment (common). For example, if taxes jumped from $4,000 to $5,200, that’s a $1,200 shortage. You could pay $1,200 now or

increase your monthly escrow by $100 (1,200/12). The lender will outline this for you. 9 Managing Your Escrow Account

• Keep Documents: Save your tax bills and escrow statements. Confirm your lender pays the right

amount to the tax authority on time. Update Info: If you refinance or get a loan modification, the escrow is often reassessed. Ensure any

• new taxes/insurance info is correct.
• Communicate: If you disagree with the lender’s new assessment (e.g., you won a tax appeal or

insurance discount), inform them. They can lower your escrow requirement if you get a certified lower tax bill or insurance policy bill. Using an escrow account is a hassle-free way to budget for property taxes. As Wells Fargo notes, it means “one mortgage payment covers multiple expenses” 44 , reducing the risk of forgetting a big tax bill. However, always review the numbers – lenders are human too. If something looks off, check with your assessor’s office and your lender. Finally, remember that whether through escrow or paying yourself, planning is key. Even with escrow, know your tax schedule: If you sell or refinance mid-year, your escrow fund is part of closing adjustments. If you

avoid escrow, follow the guidelines above to pay your tax bills properly. In either case, ProptaxHelper.com can guide you on tracking and appeal processes related to your property taxes.

Next steps

• Use the Property Tax Estimator to sanity-check your bill.
• If something looks off, run a quick Appeal Savings scenario.
• Scan the Articles list for related topics like exemptions, deadlines, and escrow planning.