Escrow for property taxes and homeowner’s insurance is an important consideration to those refinancing their home. It is important to note that an escrow deposit will be required for refinance loans that are over an 80 percent loan-to-value ratio (LTV). This is true for prime conventional loans as well as an FHA refinance.
Although technically, escrow deposits for taxes and insurance are not part of refinance closing costs, they will still be added to the refinance loan amount, unless the homeowner pays for the deposit out of pocket. Now mind you, the deposit is not a fee, but is the borrower’s money held in escrow. When the loan is terminated either through full repayment or a future refinance, the remaining escrow balance will be refunded to the borrower.
