Escrow Waiver

A mortgage escrow account is a special holding account set up by your lender to manage and pay property taxes and homeowners insurance on your behalf. It's a way to ensure these essential costs are paid on time.

🔍 How an Escrow Account Works

When you have an escrow account:

1. At closing your lender will typically collect 1 year of home insurance and 6 months of property taxes to fund the initial balance of your escrow account.
2. Your monthly mortgage payment includes:
   • Principal 
   • Interest
   • 1/12th of your annual property taxes
   • 1/12th of your annual homeowners insurance premium
3. The lender holds the tax and insurance portion in the escrow account.
4. When taxes and insurance premiums come due, the lender pays them directly to your county and insurance provider using the escrow funds.

📌 Purpose of an Escrow Account

• Ensures timely payment of taxes and insurance
• Protects the lender from tax liens or lapsed coverage
• Simplifies budgeting by spreading large annual costs into monthly payments

💡 What It Means to Waive Escrow

To waive escrow means you opt not to include taxes and insurance in your monthly mortgage payment. Instead:

• You are responsible for paying property taxes and insurance directly when due
• The lender only collects principal and interest

Some lenders charge a fee to waive an escrow account. Saffron Premier Mortgage offers free escrow waivers to well-qualified customers. Ask your loan officer to see if you qualify for this benefit.

✅ Benefits of Waiving Escrow

1. Improved Cash Flow Flexibility
   • You control when and how to pay your taxes and insurance — which can help with timing and liquidity.
2. Earn Investment Returns and Rewards
   • If you set aside the funds yourself, you may keep them in a high-yield account and earn a return on the balance.
   • You can use a rewards credit card to pay your insurance and property taxes.
3. Avoid Escrow Shortages and Adjustments
   • Escrow accounts are subject to annual reviews. If taxes or premiums go up, your monthly payment can unexpectedly increase.
   • Waiving escrow removes this unpredictability.
4. Potential Cost Savings
   • Some lenders (like Saffron Premier Mortgage) may offer a free escrow waiver, saving you on closing costs and keeping your monthly payment lower in the short term.

⚠️ Risks and Considerations

• You must be disciplined enough to set aside funds and pay large annual bills on time.
• Missed tax payments can lead to penalties, liens, or foreclosure.
• Missed insurance payments can result in loss of coverage or lender-imposed force-placed insurance (often more expensive).

🔑 Bottom Line

An escrow account is designed for convenience and protection, but waiving it gives savvy and disciplined homeowners more control over their finances. It's especially attractive to investors or homeowners with strong cash flow who want to maximize flexibility and minimize lender involvement.