The interest adjustment amount is a one-time interest expense. You pay it when you get mortgage funds before the interest adjustment date (IAD) shown on your mortgage document. You may also pay an interest adjustment amount if you change your mortgage payment date or mortgage payment frequency during the mortgage term.
Many borrowers set their mortgage payments to monthly on the first of the month. If you buy a home on another day, your lender calculates interest from your closing day to the nearest first day of the month. As the borrower, you pay the interest adjustment amount.
Example: If you buy a home on March 15 but mortgage payments are on the first of the month, the IAD is April 1. You pay interest only — the interest adjustment amount — for the time between March 15 to April 1. Your first regular mortgage payment is one month after the IAD; in this case, May 1.