An escrow setup for a cash out refinance is typically required to ensure that the funds from the refinancing are properly managed and disbursed for the following reasons:

  1. To pay off the existing mortgage on the property
  2. To cover any required inspections, appraisals, and closing costs
  3. To ensure that property taxes and insurance are paid
  4. To protect both the lender and the borrower during the closing process

The escrow company acts as a neutral third party to handle these financial transactions and ensure a smooth closing process.

This is a supplementary post to: What Is A Cash Out Refinance In Real Estate Investing?