Your mortgage escrow account pays your homeowner's insurance and property tax bills. When you sell your home and close, you don't have to pay those bills anymore. As such, your escrow account goes away and you will get a check from your lender for the balance.
During the Sale
While you're selling your property, nothing changes. You will continue to make your monthly mortgage payments and continue funding your escrow account. The account will also keep fulfilling its obligation to pay any bills that come due. Your lender doesn't consider the fact that you're selling your house -- it just wants to keep your taxes and insurance current.
Property Taxes at Closing
The closing agent will check to see if your property taxes have been paid. If your escrow account paid your taxes beyond the closing date, you'll get a refund at the closing for those overpaid taxes. However, if your escrow account isn't yet scheduled to pay the taxes, the closer will pay them from your sales proceeds and give the buyer a credit that he uses to pay his future taxes. You're not getting double charged, though -- the money is still in your escrow account.
Usually, your escrow account pays your insurance in advance. As such, you shouldn't owe anything at the closing. Your insurance company will refund any overpaid premium. For example, if your escrow account paid a $750 premium for six months of coverage and you close halfway through the six-month period, you'll get a check for $375. The check will be sent to the named party on the policy.
Getting Your Check
Unfortunately, you don't get your escrow account check at the closing. The lender won't close your escrow account until the loan gets closed out. Once your lender receives confirmation that you've closed the transaction, he will send you a check for the balance of your escrow account. The check could take a few weeks to arrive.
- Insurance Education Group: Myths vs. Facts About Home Insurance and Your Escrow Account
- The Heritage Escrow Company: Understanding Property Tax Prorations
- Wells Fargo: Understand Your Escrow Account
- Cornell Law School. "Escrow." Accessed March 15, 2020.
- Los Angeles County Consumer and Business Affairs. "Escrow." Accessed March 15, 2020.
- Consumer Financial Protection Bureau. "What Is an Escrow or Impound Account?" Accessed March 15, 2020.
- The People's Law Library of Maryland. "Rent Escrow: When the Landlord Fails to Make Repairs." Accessed March 15, 2020.
- California Department of Business Oversight. "Online Escrow Fraud Questions and Answers." Accessed March 15, 2020.
- Consumer Financial Protection Bureau. "Mortgages Key Terms." Accessed March 15, 2020.
- FindLaw. "Connecticut Security Deposit Laws." Accessed March 15, 2020.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.