Can You Waive Escrow on a Conventional Loan After Closing?

The Quick Read: Sometimes, but only if your servicer agrees. Fannie Mae and Freddie Mac allow escrow waivers on conventional loans, but neither gives you a right to one. Your equity, your payment history, and the type of loan all matter. While you pay mortgage insurance monthly, the escrow for that premium cannot be waived.

The short version: you can ask, the servicer decides, and the answer is usually harder after closing than at it.

What Escrow Is and Who Decides

An escrow account is a holding account run by your loan servicer. Each month you pay part of your yearly property tax and homeowners insurance bill along with your loan payment. The servicer pays those bills when they come due.

The servicer is the company that collects your payments. It may not be the company that made your loan. The investor is the party that owns the loan, often Fannie Mae or Freddie Mac. Three layers decide whether a waiver is possible:

• The investor’s rules. Fannie Mae and Freddie Mac set the outer limits.
• The servicer’s written policy. Each servicer must have one, and it can be stricter than the investor.
• Federal law. It requires escrow on certain loans no matter what anyone prefers.

Escrow is not a lender convenience alone. The CFPB notes that many lenders require it so the bills get paid, and that it is sometimes required by law. It also suggests considering escrow even when your lender does not require it.

Waiving at Closing vs. Removing It Later

Most conventional borrowers who skip escrow do it at purchase, when the loan is first set up. Asking later is a different request. Here is how the two compare.

The practical read: if you want to skip escrow, raise it while the loan is being set up. Lendmire’s conventional loan programs page covers the purchase side. After closing, the servicer holds the discretion, and your file has a history it can judge.

When Escrow Cannot Be Removed

Three situations block a waiver.

Borrower-paid monthly mortgage insurance. Mortgage insurance is required above 80% loan-to-value on conventional loans. If you pay it monthly, the servicer may not waive the escrow for that premium while the insurance is in place. Fannie Mae’s Servicing Guide says so directly.

That ties to a separate topic. You can request cancellation of mortgage insurance at 80% of the original value, with good payment history, no second liens, and no drop in value. The servicer must end it automatically at 78%. Cancelling insurance and cancelling escrow are different requests. Once the insurance is gone, that particular block lifts and the escrow question opens up, though the other tests still apply.

Higher-priced mortgage loans. An HPML is a first-lien loan on a primary home whose annual percentage rate sits well above a benchmark average. For loans within the conforming limit, the gap is 1.5 percentage points or more. Federal rules under Regulation Z require escrow on these loans. Most conventional loans are not HPMLs, but yours could be if your credit profile led to higher pricing. Check your Closing Disclosure or ask the servicer.

Modified loans. Both investors restrict waivers after a loan modification. A prior modification is a mandatory denial reason under Fannie Mae’s servicing rule.

The Five-Year Rule for Higher-Priced Loans

If your loan is an HPML, escrow generally cannot be cancelled for five years after closing. After that, you must ask in writing. The CFPB’s compliance guide adds two conditions: your unpaid balance must be under 80% of the original value, and you cannot be delinquent or in default.

“Original value” means the lesser of the contract price or the appraised value at closing. A new appraisal does not reset it.

Two limits on this rule:

• It covers only first-lien HPMLs on a principal home. It is not a rule for every conventional loan.
• Some small creditors operating mainly in rural or underserved counties are exempt. That exemption belongs to the creditor. You cannot create it.

What Servicers Evaluate

A servicer cannot offer you a waiver. It can only evaluate your request, and it must base its decision on your loan documents and applicable law. For Fannie Mae-owned loans, the servicing guide requires denial in these cases:

• You have had a prior loan modification, or a prior escrow waiver followed by late payments.
• Any delinquency in the prior 12 months.
• A delinquency of 60 or more days in the prior 24 months.
• Your unpaid balance is 80% or more of the original appraised value.

Freddie Mac also requires a written waiver policy. It adds that the policy cannot rest on loan-to-value alone. The servicer must also consider whether you can handle lump-sum tax and insurance payments. Freddie Mac’s published guide gives no numeric thresholds, so treat its tests as qualitative and the servicer’s policy as the real gatekeeper.

Here is the honest sticking point. Many borrowers assume a new appraisal showing 20% equity opens the door. Under Fannie Mae’s servicing rule, the test uses the original appraised value. Individual servicers may apply their own methods on top of that, so ask which value they use before paying for an appraisal.

Each servicer must record the basis for its decision in the servicing file. If you are denied, you cannot appeal to Fannie Mae or Freddie Mac. Your routes are reapplying later, refinancing, or filing a complaint with the CFPB if you think the servicer made a servicing error.

Condos, PUDs, and Blanket Policies

Condos and planned developments add a wrinkle. When an association’s blanket policy covers the building, Fannie Mae does not require escrow for property or flood insurance premiums. Property taxes are a separate matter. On an HPML, taxes on a condo or PUD unit generally still must be escrowed even when insurance is not. Flood insurance on a property without blanket coverage is still expected to be escrowed.

How to Request It: Step by Step

1. Identify your loan. Check your Closing Disclosure and ask the servicer whether it was an HPML. Also ask who owns the loan.

2. Check for mortgage insurance. If you pay it monthly, deal with that first.

3. Ask for the servicer’s escrow waiver policy. It must exist in writing. Ask what value, history, and equity tests it uses.

4. Send a written request. Keep a copy. Servicers may have a form or portal.

5. Wait for a written decision. The servicer records its basis for approval or denial.

6. If approved, watch for the closing notice and refund. Federal servicing rules call for an annual escrow analysis, and a surplus may be refunded after that analysis, per the CFPB’s Regulation X materials. Timing and amounts vary by file and servicer, so check your servicer’s notice for the details on your account.

7. Set up your own system. From here, you pay the bills.

A waiver is not permanent. Fannie Mae requires the standard escrow provision to stay in your loan documents, and Freddie Mac lets a servicer restart escrow by written notice. If you miss a bill, expect escrow to return.

Should You? A Decision Look

A scenario, without dollars: a homeowner has a conventional loan with a long on-time record, no mortgage insurance, and a balance well under 80% of the original value. Their servicer’s policy allows waivers. That borrower can reasonably ask.

Now a second homeowner. Their balance sits at 90% of the original value, they pay monthly mortgage insurance, and they were 30 days late last year. This borrower has three separate blockers. Asking would likely be denied.

Whether to ask is a budgeting question too.

Escrow smooths tax and insurance costs across the year. A waiver gives up that smoothing. If you can park the money in a dedicated savings account and trust yourself not to touch it, a waiver can work. If one big tax bill would strain your finances, escrow is doing you a favor. (Plenty of disciplined savers still keep escrow for exactly that reason.)

Waiving at origination can reduce the up-front escrow deposit you bring to closing. That is a closing-cost benefit, not a payment benefit, and it is gone once you have already closed.

If You Are Denied or Ineligible

You have three practical paths:

• Wait and reapply. Delinquency lookbacks roll off with time, and equity grows as you pay down the balance.
• Remove mortgage insurance first. Once it is cancelled at 80% of the original value, or terminated at 78%, a key blocker disappears.
• Refinance. A new loan is a new chance to decide on escrow at setup. A rate-and-term refinance on a one-unit primary residence can go to 95% loan-to-value, with mortgage insurance above 80%. Terms are subject to lender guidelines and full file review.

If your loan transfers to a new servicer, the new servicer applies its own policy plus the investor rules. Nothing guarantees an existing waiver carries over, so confirm it in writing after any transfer.

Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.

Key Terms Defined

Escrow account: A servicer-held account that collects part of your tax and insurance bills each month and pays them for you.

Servicer: The company that collects your payments and manages your loan, which may differ from your original lender.

Higher-priced mortgage loan (HPML): A first-lien loan on a primary home priced well above an average benchmark, which brings extra federal escrow rules.

Original value: The lesser of the contract price or the appraised value when you closed.

Mortgage insurance: Coverage required on conventional loans above 80% loan-to-value that protects the lender, not you.

If you already own your home and are weighing a refinance to reset your escrow setup, Lendmire can help you compare the options and what each one asks of the file. Program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB

2. Fannie Mae Servicing Guide B-1-01

3. CFPB Regulation Z § 1026.35

4. CFPB HPML Escrow Rule Compliance Guide

5. Freddie Mac’s published guide

6. CFPB Regulation X consumer laws and regulations