Trigger Rate
The rate at which a fixed-payment variable mortgage's monthly payment no longer covers the interest owed — forcing a payment increase or conversion.
The trigger rate is the interest rate at which your fixed monthly payment on a fixed-payment variable mortgage no longer covers the interest portion of the loan. Once hit, the mortgage enters 'negative amortization' — your balance grows instead of shrinking — until the lender forces action. The trigger point (typically 105% of original principal) is when the lender will either raise your payment, convert you to a fixed rate, or require a lump-sum paydown. Trigger rate mechanics only apply to fixed-payment variable mortgages; adjustable-rate mortgages (where the payment moves with rates) never hit a trigger.
Related Terms
A mortgage where the interest rate is tied to Prime Rate and moves with every Bank of Canada Policy Rate decision.
A variable-rate mortgage subtype where your monthly payment adjusts (not just the principal/interest split) each time Prime Rate changes.
When your mortgage payment fails to cover the full interest owed, causing the outstanding balance to grow instead of shrink.