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What is an escrow waiver fee and is it a fee that can be negotiated?

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January 20 2010 - McDonough
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In most States you are required to have an Impound Account for Property Tax & Insurance if the Loan Amount is over 80%. In CA over 89.9%.

Scot made reference to 0.125%. The only fee I've ever seen is 0.250%.

Some lenders do not charge this Fee if you are under the % mentioned above.

The only way this Fee may be Negotiable would be from the Broker. If the Broker is charging a Fair Price I doubt if the Broker would Negotiate this Fee.

The alternative would be to choose a lender that does not charge this Fee. Their rate may be higher or even lower. Depending on the Approved Lenders the Broker has a relationship. .... Happy funding, Rudi
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January 24 2010
On conventional loans you can choose to waive the excrow fee.

Usually the fee for this is about .25% of the loan amount.

For example if the loan amount is $200,000 then the escrow waive fee is $500

Some clients have told me they do not want to pay the excrows with their mortgage payment because they would like to deposit that small amount into an interest bearing account, earn interest on it, and then make the hazard insurance and property tax payments once per year themselves.

I think that is a great idea... but how long is it going to take you to earn $500 in interst off your escrow deposits.

It is really unlikely that you will ever earn $500 in interest. It is probably not a good idea to waive the escrows when you will be required to pay a fee.

Hope this helps.

Anthony VanDyke
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January 23 2010
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You will pay this cost no matter what the lender says. Even if there is no fee listed your rate will be higher or other costs increased. The reason is risk. With no escrow the note is considered riskier and therefore the market demands a higher return on investment. Ether it's an 8th higher in interest, a waiver fee, higher origination, or whatever that extra risk will demand extra return. That doesn't mean you can't negotiate your costs, or find a better rate. Kinda like you can negotiate the price of a car, but you can't walk in and say "I never use a parking brake so I refuse to pay for one take it off" well, you could I guess and a smart car salesman would make something up to make you happy but in reality you paid for brake it's part of the car. Look at the costs as a whole if you feel they are unfair try and get them lowered. But stop nitpicking.
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January 23 2010
it depends on the lender. I have a few that only charge a .125 fee and others charge .25 to have a mortgage without impounds for TI.
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January 22 2010
It's a good idea to pay for it via the origination fee, making tax deductible as Wayne said.
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January 21 2010
By putting 20% or more down payment on a conventional loan investors will allow applicant the option to pay their own taxes and homeowners insurance. This eliminates 3 or more months of taxes and ins. fees collected at closing, but their fee is typically a .25% of loan amount one time fee at closing. This can be negotiated by covering that cost (and other closing cost) by increasing the interest rate, as the lender will be charged that fee by the investor. On a refinance it can be rolled into closing cost if loan to value is sufficient. If the fee is part of an origination fee it may be tax deductible.
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January 21 2010
Correction...MOST lenders charge an escrow waiver fee...I just thought of one who does not.
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January 20 2010
All lenders charge an escrow waiver fee of .25%, if you opt not to set up an escrow account for taxes and insurance that the mortgage company pays on your behalf.  You can pay it outright as a discount point or absorb the fee in the rate.
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January 20 2010
 
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