What is 'Adjustment Date'
1. The date on which financial adjustments will be made to a contract or transaction, as agreed to by all the parties involved in the transaction.
2. Adjustment date also refers to the date on which the interest rate changes in an adjustable rate mortgage (ARM).
BREAKING DOWN 'Adjustment Date'
1. The term is most commonly used in real estate transactions, where the adjustment date refers to the agreed-upon date on which certain costs such as property taxes and interest will be adjusted between the buyer and the seller.
For example, in Canada, the interest adjustment date refers to the date from which interest is calculated if a real estate transaction closes and mortgage funds are provided by the lender before regular mortgage payments commence. If the lender provides the mortgage funds on June 25, but the buyer's monthly mortgage payments only start on July 1, the buyer has to pay an interest adjustment for the additional six days he owns the house.
2. In an adjustable-rate mortgage, the interest rate on the mortgage changes on the adjustment date to reflect current interest rates in the financial markets.