What is an Adjustment Date?

An adjustment date is a prearranged date when the financial terms of a contract will change. This term most commonly comes up in the context of real estate, where it is often used to refer to the date when an adjustable rate mortgage will reset with a new interest rate. When the original contract is generated, both parties will be aware that an adjustment date is structured in, and the date will be clearly stated so people can prepare ahead of time.

Some examples of financial terms that may change on an adjustment rate in addition to interest include taxes, fees, payments, rents. In all cases, people cannot make changes to a financial contract without agreeing ahead of time that those changes will occur and making note of the date, unless the contract provides measures for changing the terms in certain circumstances. With a credit card, for instance, the company reserves the right to raise the interest rate in response to late payments.

Sometimes, a contract will specify the amount of change scheduled to occur on an adjustment date. People in a lease agreement with a landlord, for example, might agree to an annual rent increase of a certain percentage. On the adjustment date, they will be expected to start paying more rent. Knowing how much the rent will increase allows them to arrange their finances ahead of time so they will be able to pay more. A graduated student loan might provide a series of escalating payments designed to keep obligations low right after graduation, with an increase over time as the graduate makes more money. Other contracts will build in an adjustment date without specifying the amount of the increase, although there may be caps on the total amount so people cannot exploit the adjustment date.

Usually, people get reminders ahead of time about the adjustment date, in case they have forgotten or are not keeping close track. These reminders will alert them to a scheduled change in the financial terms of their agreement. Before the date actually hits, a notice will be sent out to advise people of the amount of change. People with an adjustable rate mortgage, for example, will be sent paperwork about the new interest rate.

People cannot refuse the adjustment, as they already agreed to a change in terms. However, they can choose to refinance before the adjustment date arrives with the goal of avoiding the change or increase. This tactic is often seen in real estate, where people take out an adjustable rate mortgage with the goal of locking in a better interest rate in the future, when the value of the property has increased and they have more room to work with.