Mortgage Basics

What is a Statement of Adjustments?

What is a Statement of Adjustments?
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  • Tvine
| Dec 18, 2023
Reviewed, Jan 5, 2024
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    Whenever you’re buying or selling a home – or refinancing a mortgage on your existing property – your real estate lawyer or notary will prepare a Statement of Adjustments and/or Trust Ledger Statement in order to document financial detail, such as the amount owed on the mortgage at closing, taking into consideration such things as a deposit paid on the purchase, pre-paid taxes and utilities, etc.

    The purpose of these statements is to show how money was moved around throughout the process, including who owes what in the real estate transaction and/or any changes to the mortgage upon closing (in the case of a refinance).


    Key Takeaways

    • When buying or selling a home, your lawyer will prepare both a Statement of Adjustments and a Trust Ledger Statement
    • If you’re refinancing an existing mortgage, your lawyer will only prepare a Trust Ledger Statement
    • The amount of your lawyer fee will depend on the professional you use, how complicated the transaction is and whether you’re buying, selling or refinancing

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    What is a Statement of Adjustments?

    Every time you buy or sell a home, a Statement of Adjustments will be prepared for your closing day. A Statement of Adjustments is a document that details the purchase price, credits the deposit, and prorates any pre-paid items such as property taxes and utilities. The purpose is to show the final amount payable by the buyer on closing day. In most cases, both the buyer’s and seller’s lawyers will prepare their own statement, and then combine them to create one final statement of adjustments. The statement is structured like any other bank statement, with debits, credits, and amounts due.

    Important: The Statement of Adjustments shows the final amount payable by the buyer on closing day after taking into consideration the deposit you’ve already made.

    Example of a Buyer’s Statement of Adjustments

    Purchase Price $500,000
    Deposit $20,000
    Pre-paid Property Tax
    2023 taxes paid to date:
    Seller’s share:
    Credit owed to seller:

    $2,653
    -$1,500
    $1,152
    Balance Due on Closing $481,152
    Totals $481,152 $481,152
    Example is for a $500,000 purchase price with a 20% down payment. Property taxes are based on 2023 property tax rates in Montreal, Quebec.

    What is a Trust Ledger Statement?

    A Trust Ledger Statement is prepared for both the buyer and seller to show all remaining expenses for both parties. In the case of the buyer, after completing the statement of adjustments, the full amount payable to the seller is then moved over to the Trust Ledger Statement.

    The Trust Ledger Statement shows all of the money involved in the transaction on closing day, but also includes other costs such as legal fees and disbursements, land transfer tax, title insurance, etc. 

    If you’re refinancing your current mortgage, you’ll also receive a Trust ledger Statement that details the mortgage changes.

    Important: The Trust Ledger Statement shows the remaining expenses for both the buyer and seller on closing day, including legal fees and disbursements, realtor fees, land transfer tax, and so on.

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    Buyer’s Statement of Adjustments & Trust Ledger Statement

    If you’re buying a home, you’ll receive both a Statement of Adjustments and a Trust Ledger Statement. 

    A Statement of Adjustments is laid out much like your monthly bank statement – listing both your debits and credits, with a balance at the end. In the Buyer’s Statement of Adjustments, the debits represent amounts already paid, such as the deposit, while the credits include the purchase price of the home and any pre-payments like property taxes or utilities that the seller has made. The total amount in the credits column (purchase price + pre-paid items) minus the debit column (the deposit) is what you owe to the seller on closing day.

    The full amount owed to the seller is then moved over to the Buyer’s Trust Ledger Statement. This is basically a record of all funds moved around on closing day. Much like a Statement of Adjustments, the Trust Ledger Statement also includes debit and credit columns. Credits include the mortgage loan amount being advanced by your lender and your down payment. Debits include all closing costs and the amount due to the seller. Closing costs include land transfer tax, title insurance, legal fees, and disbursements, etc.

    Seller’s Statement of Adjustments & Trust Ledger Statement

    If you’re selling a home, you’ll receive both a Statement of Adjustments and a Trust Ledger Statement.

    The Seller’s Statement of Adjustments looks just like a buyer’s. Debits include anything that needs to be paid for by the seller (real estate agents’ commissions, etc), plus any unpaid property taxes or utilities. Credits include the home’s sale price and any portion of pre-paid property taxes or utilities that the buyer needs to repay to the seller. When you subtract the debits from the credits, you’re left with the amount that the buyer needs to pay you upon closing.

    On the Seller’s Trust Ledger Statement, credits you’ll see include the total amount paid to you by the buyer (which you determined in the statement of adjustments). The debit column includes any outstanding amounts you must pay upon closing, including your remaining mortgage balance on that property, legal fees and disbursements and realtor commissions. When you subtract your expenses from the amount paid to you by the buyer, whatever is leftover is your money to keep or use towards your next home purchase.

    Example of a Seller’s Statement of Adjustments

    Sale Price $500,000
    Deposit $20,000
    Pre-paid Property Tax
    2023 taxes paid to date:
    Seller’s share:
    Credit owed to seller:

    $2,653
    -$1,500
    $1,152
    Prepaid Maintenance Fees
    Monthly fees paid:
    Seller’s share:
    Credit owed to seller:

    $700
    -$650
    $50
    Balance Due on Closing $481,202
    Totals $501,202 $501,202
    Example is for a $500,000 purchase price with a 20% down payment. Property taxes are based on 2023 property tax rates in Montreal, Quebec.

    Refinancer’s Trust Ledger Statement

    If you’re refinancing the mortgage on your existing home, your lawyer will only have to prepare a Trust Ledger Statement. 

    A Refinancer’s Trust Ledger Statement lists what changes you’re making to your mortgage, including how much equity you’re accessing and any payments you need to make during the transaction. If, for instance, you’re refinancing to use some home equity to pay off debt, your debits will include the equity you’re tapping into, while the credits will list all the payments you need to make with that equity (including your debt, title insurance, legal fees and disbursements, etc.). When you subtract your credits from your debits, whatever is leftover is your money to use how you wish.

    Example of Refinancer’s Trust Ledger Statement

    Equity Pullout
    New Mortgage Loan
    Less first Mortgage Loan Balance
    Received from Lender

    $480,000
    -$300,000
    $180,000
    Paid to Credit Card #1 $4,000
    Paid to Credit Card #2 $14,000
    Paid Title Insurance $250
    Paid Legal Fees and Disbursement $1,000
    Paid to you after closing $160,750
    Totals $180,000 180,000

    Costs associated with real estate attorneys

    The amount of your lawyer or notary fee will depend on the professional you use, how complicated the transaction is and whether you’re buying, selling or refinancing. The typical cost is $800-$1,000.

    FAQ

    Where can I find a statement of adjustment template?

    While you can easily find templates for a statement of adjustment, it is always advisable that a lawyer prepare the statement for you, whether you are the buyer or the seller.

    What is the difference between a trust ledger and a statement of adjustments?

    The Statement of Adjustments shows the final amount payable by the buyer on closing day after taking into consideration the deposit you’ve already made. On the other hand, the Trust Ledger Statement shows the remaining expenses for both the buyer and seller on closing day, including legal fees and disbursements, realtor fees, land transfer tax, and so on.

    Who prepares a statement of adjustment?

    In most cases, both the buyer’s and seller’s lawyers will prepare their own statement, and then combine them to create one final statement of adjustments. The statement is structured like any other bank statement, with debits, credits, and amounts due.

    Conclusion

    Whether you’re a buyer, a seller, or a refinancer, the purpose of a Statement of Adjustments and a Trust Ledger Statement is to track the money that was move around throughout the homebuying or refinancing process. These statements are prepared by a real estate lawyer or notary and allow you to see what you owe or what you are owed, as well as where your funds went. Understanding these statements is important when it comes to budgeting and making sure there are no surprise payments!


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