Q) What is IAD?

A) IAD stands for Interest Adjustment Date. The IAD is generally the 1st day of the month following your closing date. The IAD represents interest owing on your mortgage balance from the advance date (closing date) to the interest adjustment date.

Example: Mr Smith's closing is January 11th therefore his IAD date is February 1st, Mr Smith's interest costs are calculated for the period of January 11th to January 31st (16 days) payable February 1st (IAD).

EXCEPTION TO ABOVE: For mortgage transfers interest the adjustment date is 1st of the same month in which the closing takes place.

Q) HOW IS MY PROPERTY TAX PAYMENT CALCULATED ?

A) Each lender varies in its approach but in general, to ensure adequate funds are available for lenders to pay your initial tax installments, the following is the calculation used to arrive at the property tax portion of your mortgage payment: In the first year of your mortgage, 18 months of property taxes are payable over a 12 month period i.e. Mr Smith's taxes are $2,400/yr, over an 18 month period his property tax payable is $3,600 therefore, $3,600 payable over 12 months results in a tax payment of $300 per month.

Your tax account is usually reviewed each year after the final tax bill is paid. It is at this time the lender determines if there is a surplus or deficit and adjusts your property tax payment accordingly. If your tax account is operating with a deficit you will be in a catch-up period necessitating a payment larger than 1/12 of the annual property tax payable. If your tax account is operating with a surplus your monthly tax payment will be 1/12 of the annual property tax payable.

Q) DO I EARN INTEREST ON THE BALANCE HELD IN MY TAX ACCOUNT ?

A) Yes, interest is usually paid on the credit balance in your tax account at the same rate of interest paid on savings accounts.
Should your tax account be in overdraft, interest is usually payable on the overdrawn amount at the same rate of interest paid on your mortgage.