Trigger Rate Calculator

A variable-rate mortgage can be attractive from a budgeting perspective because your payment doesn’t change when the prime rate goes up or down. When prime decreases, you benefit because you’ll pay down more principal and reduce the time it will take to pay off your mortgage. When prime increases however, a larger portion of your payment will be directed towards interest and less to principal reduction, lengthening the time it will take to become mortgage free. If rates keep rising, you may hit your trigger rate, which means your mortgage payments only cover interest i.e., you are paying 100% interest, with no principal reduction.

This calculator can help you determine your approximate trigger rate:

If rates keep rising, your mortgage balance could start to increase because your payment no longer covers all the interest you are being charged. Your balance could rise back to your original contracted amount, and eventually you may hit your lender’s trigger point, in which case your lender will request that you make a lump sum payment, increase your payments, or convert to a fixed-rate mortgage within 30 days.

While not all lenders are the same, here is a trigger point example from a primary variable-rate lender:

  • For a conventional variable mortgage, you can stay with your current payment until your principal amount plus interest owing reaches 80% of your home’s value.
  • For an insured variable mortgage, you need to act when your principal amount plus interest owing is at 105% of your original principal amount.

If you have any questions on your trigger rate or trigger point, please get in touch. And note, this does not apply to adjustable-rate mortgages where payments increase or decrease as the prime rate changes. Payments with adjustable-rate mortgages are not static.