Real Estate and Home Mortgages - can I eliminate escrow?

We just got a notice that our escrow account is underfunded due to an upcoming tax increase, and it got us thinking. Rather than have several thousand dollars in someone else's bank acount, we'd rather have it earning interest for us...and we'll pay the taxes/insurance/etc. Is it possible to close an escrow account?

Yes, it is. Just make sure you save your "extra" money each month. I've known more than one person to stop their escrow and then not have the money when taxes or insurance came due.

It may depend on your loan type and % of equity. FHA and VA loans used to require escrow, not sure if they still do. Also if you're not in a strong equity position (less than 20%) the lender may require it.

frank

Check into it, but as Frank said, you may have agreed to this as a condition of your loan.

You'll have to get with your lender on this. Most will not allow you to waive escrow on a new loan (purchase or refi) unless putting down 20% (or 80% LTV on refi), and even then they usually charge you a fee to do it. I'm sure they'll have similar guidelines for closing an existing arrangement.
Why? Risk. Many people simply won't keep up with it correctly, they've learned this the hard way.
If you really think you'll earn that much interest, you should check with your lender to see what they'll allow. Escrow shortages are a fact of life these days with taxes going up and up in most areas. You could pay the difference yourself towards escrow and not have the payment increase.
You could also get with your tax assessor and dispute the increase, I've seen that work sometimes.