Which mortgages have a trigger rate?

Trigger rates apply to fixed-payment variable-rate mortgages, where your payment stays the same as the rate moves. Variable mortgages whose payment adjusts with prime, and fixed-rate mortgages, do not have a trigger rate in the same way.

What happens if I hit my trigger rate?

Once you reach the trigger rate, your entire payment goes to interest. If rates rise further, unpaid interest is added to your balance. Your lender will typically ask you to increase your payment, make a lump-sum payment, or convert to a fixed rate.

How do I find out my trigger rate?

Your lender can tell you your specific trigger rate, which depends on your payment amount, balance, and amortization. Many lenders show it on statements or notify you as your rate approaches it.

Mortgage Glossary

What is Trigger Rate?

A trigger rate is the interest rate at which a fixed-payment variable-rate mortgage payment is no longer enough to cover the interest being charged. It applies to variable mortgages where the payment stays the same even as the rate moves. Once rates rise to the trigger rate, none of your payment goes to principal, and the unpaid interest can start to be added to your balance.

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Quick answer

Also known as: Trigger point

Key points

Applies to fixed-payment variable-rate mortgages where the payment stays constant.
It is the rate at which your whole payment goes to interest and none to principal.
Beyond the trigger rate, unpaid interest can be added to your balance (negative amortization).
The related trigger point is when the balance would exceed your original principal.
Lenders usually require action, such as a higher payment or lump sum, at or near the trigger point.

Trigger Rate explained

On a fixed-payment variable-rate mortgage, your monthly payment is set at the start and does not automatically change when the lender's prime rate moves. As rates rise, more of each payment goes to interest and less to principal. The trigger rate is the rate at which the entire payment is consumed by interest, leaving nothing for principal.

If rates climb past the trigger rate, the interest you owe exceeds your payment, and the shortfall is added to the loan. This is called negative amortization, and the loan balance can grow rather than shrink. A related concept is the trigger point, which is reached when the balance would exceed the original principal amount you borrowed. At or near that point, lenders typically require you to increase your payment, make a lump-sum payment, or convert to a fixed rate.

What a Trigger Rate is for

The trigger rate exists as a built-in warning line on fixed-payment variable mortgages. It signals when a borrower's set payment can no longer keep up with rising interest, prompting action before the balance grows out of control.

How it can help you

Knowing your trigger rate helps you understand how much room you have before rising rates force a change to your payment. It lets you plan ahead, budget for a possible payment increase, or weigh converting to a fixed rate. If you are reviewing your options, Lenderoo shops 40+ lenders for free so you can compare fixed and variable products and see which structure fits your tolerance for rate movement.

When it comes up

A borrower with a fixed-payment variable mortgage watches the prime rate climb. As their rate approaches the trigger rate, they realize their payment will soon cover only interest, so they proactively increase their monthly payment to keep paying down principal and avoid negative amortization.

Example: Reaching the trigger rate

Suppose a borrower has a fixed-payment variable mortgage with a $2,000 monthly payment. When their interest rate sits at 4%, most of the payment covers interest and a portion reduces principal.

As prime rises and their rate climbs toward, say, 6%, the interest portion grows until the full $2,000 is needed just to cover interest. That rate is their trigger rate. If the rate goes any higher, the unpaid interest begins adding to the balance, and the lender will likely ask them to raise their payment or make a lump-sum contribution.

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Trigger Rate: frequently asked questions

Common questions Canadians ask about trigger rate.

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Related mortgage terms

Variable-Rate Mortgage

A mortgage whose interest rate moves up or down with the lender's prime rate over the term.

Read definition

Negative Amortization

When unpaid interest is added to the principal, increasing the balance owed instead of reducing it.

Read definition

Prime Rate

The base lending rate banks use to price variable loans.

Read definition

Adjustable-Rate Mortgage (ARM)

A variable mortgage where the payment changes as the prime rate changes.

Read definition

Fixed-Rate Mortgage

A mortgage with an interest rate that remains constant.

Read definition

Back to full glossary

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Mortgage Glossary

What is Trigger Rate?

Find my best mortgage Back to glossary

Quick answer

Also known as: Trigger point

Key points

Applies to fixed-payment variable-rate mortgages where the payment stays constant.
It is the rate at which your whole payment goes to interest and none to principal.
Beyond the trigger rate, unpaid interest can be added to your balance (negative amortization).
The related trigger point is when the balance would exceed your original principal.
Lenders usually require action, such as a higher payment or lump sum, at or near the trigger point.

Trigger Rate explained

What a Trigger Rate is for

How it can help you

When it comes up

Example: Reaching the trigger rate

Suppose a borrower has a fixed-payment variable mortgage with a $2,000 monthly payment. When their interest rate sits at 4%, most of the payment covers interest and a portion reduces principal.

Have a question about trigger rate?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

Trigger Rate: frequently asked questions

Common questions Canadians ask about trigger rate.

Keep learning

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary