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

When a home is sold, sellers often wonder about their escrow account. This account, typically managed by a mortgage lender, plays a significant role in handling ongoing property-related expenses. Understanding how these funds are managed upon the sale of a home is a common concern.

Understanding Your Escrow Account

An escrow account serves as a holding place for funds collected by the lender from the homeowner. Its primary function is to accumulate money for property-related expenses, predominantly property taxes and homeowner’s insurance premiums. The lender collects a portion of these costs with each monthly mortgage payment.

This arrangement ensures that financial obligations are met on time, protecting both the homeowner and the lender’s interest in the property. The lender acts as an administrator, paying these bills directly from the escrow account when they become due. This system helps homeowners budget for large expenses by spreading them out over monthly installments.

Handling Escrow Funds When Selling Your Home

When a home is sold, the existing mortgage loan is paid off, and the associated escrow account closes. At closing, the mortgage lender is responsible for reconciling the escrow balance. They will pay any outstanding property tax or homeowner’s insurance bills that are due up to the date of the property transfer. This settles all property obligations during the sale.

Following the payment of these final expenses, the lender determines if a surplus or deficit exists in the escrow account. This reconciliation process is reflected on the final closing disclosure provided to the seller. The closing disclosure itemizes all financial transactions related to the sale, including the final accounting of the escrow funds.

Receiving Your Refund

If a surplus remains in the escrow account after all outstanding property taxes and insurance premiums have been paid by the lender up to the closing date, the lender will issue a refund to the former homeowner. This refund comes as a check mailed to the seller’s new address or via direct deposit. It usually arrives within 30 to 60 days after the closing date.

Should the refund not be received within the expected timeframe, contact your former mortgage lender directly. Inquire about the status of the escrow account closure and the refund disbursement. Keeping a record of the closing disclosure is beneficial, as it provides a clear breakdown of the escrow account’s final balance at the time of sale.