Do I Get My Escrow Back When I Sell My House?

When you own a home with a mortgage, an escrow account is often established to manage certain property-related expenses. This account serves as a dedicated fund where a portion of your monthly mortgage payment is allocated to cover future property taxes and homeowner’s insurance premiums. This arrangement ensures these recurring bills are paid on time, protecting both your investment and the lender’s interest in the property. When you sell your house, you typically receive any remaining balance in this escrow account.

How Escrow Funds are Handled at Closing

Upon the sale of your home, your mortgage lender undertakes a reconciliation process for your escrow account. This reconciliation is a detailed accounting of all funds collected and disbursed from the account up to the closing date. The lender reviews the account balance to determine if there are any outstanding property tax payments or homeowner’s insurance premiums due or coming due shortly after the sale.

During this process, the lender ensures that any outstanding bills are paid from the escrow funds. For instance, if property taxes for the current period have not yet been fully paid, the lender will use the money in your escrow account to cover your portion of these taxes. After all necessary payments are made, the lender determines the final surplus or deficit in the account.

The mortgage balance is paid off at closing using the proceeds from the sale. This payoff triggers the closure of your mortgage loan and the associated escrow account. The lender’s reconciliation confirms the exact amount of any remaining funds.

Receiving Your Escrow Refund

After your home sale closes, the process of receiving your escrow refund begins. The mortgage servicer will issue a refund check for any surplus balance. You can generally expect to receive these funds within 20 to 30 business days following the closing date.

The most common method for receiving your refund is via a check mailed to your forwarding address. Some lenders may offer the option for direct deposit. You should also receive a final escrow statement or a closing disclosure document that details the reconciliation of your account and confirms the refund amount.

Factors Influencing Your Final Escrow Balance

Several factors can influence the amount of your escrow refund when selling your house. One common adjustment involves property tax prorations, where taxes for the current year are divided between the buyer and seller based on their periods of ownership. For example, if you sell your home midway through the tax year, you are responsible for taxes up to the closing date, and the buyer assumes responsibility thereafter.

Any outstanding or past-due escrow payments can also affect your final balance. If there were any previous shortages in your escrow account, these amounts might be deducted from the available funds. Conversely, if your property tax assessments or homeowner’s insurance premiums decreased, or if your lender overestimated the amounts needed, you might have accumulated a larger surplus. These adjustments are typically reflected in the final settlement statement.