Adjustment Date Details

An adjustment date is a significant date in a real estate contract. It is the time agreed upon by both parties in the agreement when any changes in the financial implications of the contract can be effected. This usually comes into play when a home is up for sale. Certain factors affect this date, such as the transfer of utilities, property taxes, charges on loan interest, dates of insurance, etc.

These factors each have a bearing on the adjustment date. When the estate is closing its sale, the shared cost, based on the factors listed above and both the seller and buyer, will be determined on this date. Additionally, interests on the mortgage will begin to accrue on the adjustment date. The seller and buyer should agree on an adjustment date closest to the day of closing the sale to help to limit the sum due at the settlement of the sale.

Example of Adjustment Date

To better understand how an adjustment date works, let's look at the example of Mr. Brown, who is buying a house on a mortgage. He qualifies for and obtains a mortgage of $350,000 at an interest of 7%. The mortgage is approved and disbursed on January 1st with the first payment due in a month on February 1st. This means that the adjustment date is January 1st, and the interest will accrue until the first payment on February 1st.

The lender will use the adjustment date of January 1st to calculate the monthly repayments due. A lender will set the adjustment date since, once the money is disbursed, they expect it to be used. This explains why the adjustment date is crucial to the interest accrued and is calculated during servicing the loan and selling of the property that Mr. Brown bought on the mortgage.

Significance of Adjustment Date

An adjustment date significantly affects the rate of your monthly repayments. This is because the interest that accrues from the day the loan amount is disbursed to the first day of repayment adds up to the monthly premium. The lender usually comes up with a formula to calculate these monthly premiums using the adjustment date.

Adjustment dates also affect the value of a property at the point of sale. It is advisable to set your closing date as close to your adjustment date as possible. Doing this will help you avoid accruing any extra interest on your property and give you the best closing price.

Adjustment Date vs. Completion Date

If you are in the market for some property or looking to sell your home or property, you have probably come across these two terms. Though they may seem similar, they are not the same thing. They work together at different times to complete the process of buying or selling a property.

On the one hand, we have adjustment dates. An adjustment date, in a nutshell, is the calendar date that certain adjustments on maintenance and utility fees, property taxes and so on are made. This date affects the rate of interest accrued and has to be agreed upon by both parties, the buyer and the seller.

A completion date, on the other hand, is simply the day a sale is completed. It is the date that the title and money for the sale exchange hands. It is important to note that this date cannot fall on a holiday. It must be on a business or working day.