How can I delete my escrow account in Illinois? I was told that the LTV has to be less than 75%.Is this true?

Question

I am interested in deleting my current escrow account. When I called my mortgage company to delete it, they told me that according to Illinois State Law, the LTV (Loan to Value) had to be less than 75%. They base this percentage on my current loan balance divided by my Original loan balance. I thought it would be my loan balance divided by the current appraised value of my home. I need help! Is this true? Am I stuck with my escrow account??

Thank you!

Answer 1

Go back and read what you signed when you got the loan. That will be in the stack of papers in the file in the box at the back of the closet... the file the title company gave you.

it will be outlined there. You may be able to get it done by paying for a new appraisal, to show that the lender is only carrying less than 75% of the current value.

If you do go through the expense of an appraisal, make sure to get the PMI off of your payment at the same time. That will probably benefit you more than getting the escrow account removed.

Answer 2

First off the appraised value of your home has nothing to do with it. You're lender doesn't care in the least what the value of your home might be now. They deal with the hard facts of what they loaned you and what you still owe.

I don't believe in Illinois there is an actual law that says when a lender can and can't make you escrow. But in general, because it is a competitive market, most lenders will waive the escrow requirement when you have greater than 20% down on your home. As an example using simple math if your home is worth $100,000, then either if you put > $20,000 down on a home or once you have paid >$20,000 of the loan off you can ask to have your escrow waived. I do not believe by law they have to waive it, but if they don't then you can just go find another lender. Other lenders will line-up for your loan and you can use the "I don't want an escrow" as part of your negotiation with the new company. Of course to keep your loan your existing lender may decide to waive your escrow if you tell them you're shopping your loan elsewhere.

Sounds like your lender has a 25% requirement. I'll bet that is there internal requirement, and not a state law. Call other lenders and ask what their escrow requirement is.

There is a helpful link below. Good luck.

Answer 3

If you have a NEW APPRAISAL that justifies what you are stating then send it to the lender and ask for the escrow waiver. It just makes you responsible for the taxes and insurance.