In Canada, an Interest Adjustment Date (IAD) is used to align your first regular mortgage payment with your preferred schedule—such as the 1st of the month. If your mortgage closes before that date, your lender will calculate the interest for the days between your closing date and the IAD, and you’ll make a one-time interest-only payment on the IAD. This ensures your regular payments start on your chosen date. You’re not paying extra overall—just the interest owed for that short period before full payments begin.
Here is a sample scenario with regard to an Interest Adjustment Date.
Mortgage amount: $400,000
Interest rate: 5.50%
Closing date: June 20
First regular payment date: August 1.
Interest Adjustment Date (IAD): July 1
Your mortgage closes on June 20, but since you want your regular payments to start on the 1st of each month, your lender sets your IAD as July 1. This means you’ll make a one-time interest-only payment on July 1 to cover the interest from June 20 to June 30 (11 days).
Some lenders do things a bit differently and instead of withdrawing the IAD payment from your account on the IAD date, they instead will require the IAD payment to be made upfront at your lawyers office as part of your total closing costs.
Using the same example above:
Interest Adjustment Date (IAD): July 1, however the IAD payment will be added to your closing costs on June 20th; instead of coming out automatically from your account on July 1.
First regular payment date: August 1
Interest Calculation Using the Example Above:
Interest = (Mortgage amount × Interest rate ÷ 365) × number of days
= ($400,000 × 0.055 ÷ 365) × 11
= $665.75 (one-time IAD payment due on July 1 or at closing as mentioned)
Your first full mortgage payment will then begin on August 1, and continue on the 1st of each month going forward.