A mortgage escrow waiver is an agreement between a lender and a borrower that allows the borrower to pay property taxes, homeowners insurance, and other related expenses directly rather than through an escrow account.
When a borrower takes out a mortgage, the lender may require them to establish an escrow account. This account is used to collect and hold funds for the payment of property taxes, insurance premiums, and other related expenses. The lender then makes these payments on the borrower’s behalf when they become due.
With an escrow waiver, the borrower agrees to make these payments directly to the relevant parties. This means that the borrower is responsible for budgeting and paying for these expenses themselves, rather than having the lender do it for them.
An escrow waiver may be beneficial for borrowers who prefer to have more control over their finances or who are able to earn interest on the money they would have otherwise deposited into an escrow account. However, it also means that the borrower takes on the risk of not having enough funds available to make these payments when they become due, which could result in late fees, penalties, or even foreclosure.