A time may come during your homeownership where you may want to refinance your existing mortgage. You may do this to lower your interest rates, pay off your mortgage sooner or lower your monthly payments if experiencing financial troubles. Many people will get the refinancing through the same bank that is holding the mortgage on their home.
During the refinancing, you may wish to ask your lender what happens with the money you placed into the escrow account. Do you get a refund? Does the money transfer into a new escrow account? How much will you have to pay into the escrow account?
Facts About Your Escrow Account During Mortgage Refinancing
Even when you refinance, you will have to continue to pay into your escrow account for the homeowner’s insurance and property taxes that your bank has to pay on your behalf. Depending on your bank and which state you live in, your existing escrow amount will be given back to you by your bank. A new escrow account will be opened based on the terms of your refinancing.
As for the escrow amount, it will still be based on 1/12th of your property tax and 1/12th of your homeowners insurance premium. If nothing changes with your taxes or insurance, you will basically have to pay the same amount per month. If there has been any changes, such as your property taxes going up, then you may have to pay an additional $100 to $200 a month on top of the original payment amount.
The lender normally asks that you place in an additional 1-to-2 month’s worth of payments into the new account in advance. You should ask your lender for the details to find out how much out-of-pocket expenses you will pay.