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The line item that my loan officer said was from my existing escrow account balance is actually labeled "Lender Credit towards Closing Costs". That didn't sound like the balance of my escrow account to me.

That is typically the amount the new lender is giving you as a rebate because you chose to accept an interest rate that is a bit higher than the current going rate. If you took a lower interest rate, this lender credit would be smaller or non-existent. And you could get a rate even lower than that by paying some money up front instead of the lender paying you.

Typically, these rebates are used so that you can refinance with less or no money out of pocket. The other way to accomplish that is to borrow a bit of extra money to pay the refi expenses. And combining both is also quite common.

So are you trying to get a "no closing cost" refinance?

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