Adjustment Date
The specific date when the interest rate on an adjustable-rate mortgage changes according to the loan terms. This date is predetermined in the loan agreement and occurs at regular intervals throughout the loan term. The new rate is calculated based on the current value of the specified index plus the loan's margin.
Example
“The loan documents specified that the first adjustment date would occur exactly three years after closing, when the interest rate could change based on current market conditions.”
Memory Tip
Think of it as your mortgage's "birthday" - the adjustment date is when your interest rate gets a new age (rate).
Why It Matters
Knowing adjustment dates helps borrowers prepare for potential payment changes and budget accordingly for higher or lower monthly payments. This timing is crucial for financial planning and refinancing decisions.
Common Misconception
Borrowers sometimes think adjustment dates are flexible or negotiable, but they are fixed terms established in the original loan agreement.
In Practice
On a 3/1 ARM, the first adjustment date would be exactly three years after the loan closing date, and subsequent adjustments would occur annually thereafter. Lenders typically notify borrowers 30-60 days before each adjustment date with the new rate and payment amount.
Etymology
This term emerged alongside adjustable-rate mortgages in the 1970s, combining "adjustment" (from Latin "ad" meaning "to" and "justus" meaning "right") with "date" to mark when rates would be recalibrated.
Common Misspellings
Compare today's mortgage rates
More in real estate
Other real estate terms you should know
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.