Adjustment Date Definition
Adjustment Date is also known as an Interest Adjustment Date
The adjustment date is the date in which the interest will begin to accrue on your mortgage, before payment is made on the mortgage. It is usually the date the mortgage funds are dispersed.
Mr. McGillicuddy obtains a mortgage for $200,000 at 5% interest. The mortgage is dispersed on November 1. The first payment is due December 1. The adjustment date is November 1, the date the money is dispersed. The interest on the mortgage will accrue until December 1, when the first payment is received. $821.92 in interest will accrue between the adjustment date and the time of the first payment.
Adjustment dates affect the amount of your monthly payment, as the mortgage lender will use a formula to calculate the amount of interest accruing at each interval based on the adjustment date. The lender may collect the amount of accrued interest from the adjustment date to the date of the first payment, when the property closes. The amount will be shown on the closing statement. In the above example, it may show as “interest from November 1 to December 1, $821.92. At times, this interest is added to the principal at closing.
The adjustment date is set because the lender is providing this money to you, and you have use of this money prior to making a first payment. Mortgage lenders charge interest for the use of their money, and the adjustment date is simply a way of calculating interest during that time.
First Foundation Tips
To avoid paying interest for the period between your adjustment date period and closing, you can attempt to schedule your closing as close to the adjustment date as possible.
At First Foundation we will go over all closing costs with you, including the interest accrued from the adjustment date, as part of the mortgage qualification process.
If you are interested in learning more about your interest adjustment date, please feel free to contact us today!