Everything is set for your mortgage. You've signed the paperwork, chosen your payment frequency, and you know when your first payment will be due – or do you? While you've covered the major points, one thing we don't often discuss when it comes to financing is the interest adjustment date.
In most cases, the closing date for your mortgage deal won't line up perfectly with your first payment date. That's exactly what an interest adjustment date is for! Think of it as a little "catch up" on the interest that accrues on your mortgage between the time you borrow the money and when you make your first payment.
Let's take a typical example:
- Mortgage Amount: $450,000
- Interest Rate: 3.39%
- Amortization: 25 Years
- Term: 5 Years
- Closing Date: October 31, 2017
|On a bi-weekly payment frequency||On a monthly payment frequency|
|First Payment Date:||November 18, 2017||December 1, 2017|
|Interest Adjustment Date:||November 3, 2017||November 18, 2017|
|Interest Adjustment Amount:||$124.35||$663.60|
Here's the tricky part: each lender treats the interest adjustment slightly differently, so it's important to confirm the details with your broker and at your lawyer. Many lenders will simply calculate the interest adjustment in advance and deal with the payment during the transfer of funds to your lawyer, so you may not even notice. However, some lenders will debit this small, partial payment from your bank account on the interest adjustment date.
One more detail
If you change your first payment date after you sign the financing agreement at your mortgage broker's office, the lender will recalculate the interest adjustment amount and your broker won't know that detail. At that point, it's up to you to let your broker know about the change so that they can provide you with an updated amortization table or summary. You'll also want to pay more attention to confirm the interest adjustment payment amount and date when you finalize the deal at your lawyer's office.
If you want to work with a professional team that cares about providing you with top-notch customer service throughout your mortgage process, set up a free consultation with one of our planners today. Call us toll-free at 1-855-590-6520 or visit us at 307 Goldstream Avenue during regular business hours. We can also arrange an appointment evenings or weekends to work with you.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.