Escrowed funds. Ever redeemable?

[Victor S.]

Hi, all. 

Going thru the final stages of my first closing process and wanted to see what happens to escrowed funds as the time goes on. I'm putting 15% down, and the lender requires escrow for 14 months home insurance and some taxes. It totals up to a few grand, so I'm curious if I'll ever get access to these funds? I understand it's a "risk cushion" for under 20% DP people, but will it ever be redeemable after I hit 20%? Property was already appraised 8% higher than what I'm getting it at (it's my live-in, not investment per se), if that makes any difference. 

Thanks!

[Stephanie Medellin]

@Victor S.  They aren't keeping the 14 months insurance in escrow - the first years premium will be paid in full at closing and then there will be a 2 month cushion.  Your account will build up over the year so when the next full year premium is due, there will be sufficient funds to pay.  Same with taxes - they collect enough upfront so that money plus the portion of your monthly payment will be enough to pay taxes when due.  The amount will depend on when and how taxes are paid in your area.

RESPA allows lenders to have a maximum cushion of 1/6 of the yearly total, or 2 months, in your account.  RESPA also requires the lender review your escrow each year. If your account is over the maximum allowed by more than $50, the lender has to return the cash to you within 30 days. The lender can keep overages of less than $50 and apply the amount to your escrow payments for the next year or give you the money back. If your account is short, the lender can add the shortage to the escrow payments over the next year or ask you to pay the difference.