Costs & fees
Interest Adjustment Period
The few-day gap between funding day and your first regular mortgage payment — interest is prorated by days.
Most lenders structure regular mortgage payments to start on the first of a month. If your mortgage funds on (say) the 15th, there are 15 days of interest accrued before your first regular payment date. The interest adjustment period (IAP) is that gap, and the interest charge for those days is called the interest adjustment.
Lenders typically debit the IAP interest from your account on a single date or roll it into your closing costs, depending on the lender's policy. The amount is usually small — a few hundred dollars at most — but if you fund close to month-end it can be a few dozen dollars instead. Your lawyer or notary will detail it on the closing statement.
No IAP is required if you arrange to fund on the same day your first payment is due (rare in practice). For most homebuyers it's a routine line item, not a planning concern — but it's nice to know what the small extra charge on your statement is.
Source: FCAC — Mortgage closing costs