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The Interest Adjustment Date (IAD) is the date interest begins accruing on a new mortgage, sitting between closing/funding and the day before the borrower’s first regular payment; interest for that short gap is collected separately as an interest adjustment, not folded into the first regular payment.
Regular mortgage payment cycles usually start on a fixed day of the month, but a home can close on any date. The IAD bridges that gap: the lender charges simple interest for the odd number of days between funding and the start of the regular payment schedule, collected as a one-time interest-adjustment amount around closing.
This shows up alongside other prorated items in the closing paperwork. Once the IAD period ends, the mortgage moves onto its normal payment frequency from the first regular due date forward.
Itemized separately: the interest-adjustment amount is shown apart from other closing costs and apart from the first regular mortgage payment.
Short period only: the IAD period covers just the days between closing/funding and the start of the regular payment cycle, not a full payment period.
Payment frequency starts after it: whichever payment frequency was chosen only begins once the IAD period has ended.
Convention varies by lender: the exact method for calculating the interest-adjustment amount can differ slightly from one lender to another.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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