[et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”0px||||false|false” da_disable_devices=”off|off|off” global_colors_info=”{}” custom_margin__hover_enabled=”off|desktop” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” width=”95%” max_width=”100%” custom_margin=”||-24px||false|false” custom_padding=”55px||||false|false” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][wahi_breadcrumb _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][wahi_breadcrumb-link title=”Real Estate 101″ _builder_version=”4.18.0″ _dynamic_attributes=”link_option_url” _module_preset=”default” link_option_url=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9saW5rX3VybF9wYWdlIiwic2V0dGluZ3MiOnsicG9zdF9pZCI6IjcyMiJ9fQ==@” global_colors_info=”{}”][\/wahi_breadcrumb-link][wahi_breadcrumb-link title=”Buy” _builder_version=”4.18.0″ _dynamic_attributes=”link_option_url” _module_preset=”default” link_option_url=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9saW5rX3VybF9wYWdlIiwic2V0dGluZ3MiOnsicG9zdF9pZCI6IjE2MzIifX0=@” global_colors_info=”{}”][\/wahi_breadcrumb-link][wahi_breadcrumb-link title=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF90aXRsZSIsInNldHRpbmdzIjp7ImJlZm9yZSI6IiIsImFmdGVyIjoiIn19@” _builder_version=”4.18.0″ _dynamic_attributes=”title” _module_preset=”default” module_text_color=”#686E6E” global_colors_info=”{}”][\/wahi_breadcrumb-link][\/wahi_breadcrumb][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _dynamic_attributes=”content” _module_preset=”default” header_font_size=”3.5rem” header_line_height=”4.5rem” header_font_size_tablet=”42px” header_font_size_phone=”3rem” header_font_size_last_edited=”on|phone” header_line_height_tablet=”4.5rem” header_line_height_phone=”3.2rem” header_line_height_last_edited=”on|desktop” global_colors_info=”{}”]@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF90aXRsZSIsInNldHRpbmdzIjp7ImJlZm9yZSI6IjxoMT4iLCJhZnRlciI6IjwvaDE+In19@[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”3px||3px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][wahi_socialsharing _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][\/wahi_socialsharing][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”24px” text_line_height=”1.5em” custom_margin=”||12px|||” global_colors_info=”{}”]<\/p>\n
Understanding your trigger rate can help you plan ahead before rising mortgage costs put pressure on your budget.<\/span><\/p>\n<\/div>\n [\/et_pb_text][et_pb_text _builder_version=”4.27.4″ _module_preset=”default” text_font_size=”1.13rem” text_line_height=”1.18rem” custom_margin=”||7px|||” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n By Emma Caplan-Fisher<\/a> | 8 minute read<\/p>\n [\/et_pb_text][et_pb_post_title title=”off” author=”off” date_format=”M j” categories=”off” comments=”off” featured_image=”off” _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_post_title][et_pb_image src=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9mZWF0dXJlZF9pbWFnZSIsInNldHRpbmdzIjp7fX0=@” align=”center” force_fullwidth=”on” _builder_version=”4.18.0″ _dynamic_attributes=”src” _module_preset=”default” custom_padding=”40px|||||” border_radii=”on|32px|32px|32px|32px” global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n If you have a <\/span>variable-rate mortgage<\/span><\/a>, there’s a good chance you’ve heard the phrase “trigger rate” and maybe felt uneasy about it.<\/span><\/p>\n \u00a0<\/span><\/p>\n A trigger rate is reached when rising interest rates eat up so much of your monthly payment that nothing’s left to reduce your principal. So, your entire payment goes toward interest, and your mortgage balance stops shrinking.<\/span><\/p>\n From March 2022 to July 2023, the Bank of Canada raised its overnight rate from 0.25% to 5%\u00a0 a pace <\/span>not seen since<\/span><\/a> the 1990s with inflation targeting. By the end of November 2023, this caused up to 80% of variable-rate mortgages with fixed payments to <\/span>reach their trigger rate<\/span><\/a>.<\/span><\/p>\n \u00a0<\/span><\/p>\n While rates have since declined significantly, renewal pressure remains. This year, 3.1 million Canadian mortgages (52%) have <\/span>come up for renewal<\/span><\/a> by the end of 2027, with the steepest payment increases expected for those who borrowed at historically low rates in 2021\u20132022.<\/span><\/p>\n \u00a0<\/span><\/p>\n Understanding your trigger rate can mean the difference between being <\/span>caught off-guard<\/span><\/a> and having a plan before your lender comes calling.<\/span><\/p>\n –<\/span><\/p>\n A trigger rate is the interest rate at which a fixed mortgage payment no longer covers any principal repayment. When you hit your trigger rate, your entire monthly payment goes toward interest, and your mortgage balance stays exactly where it is.<\/span><\/p>\n \u00a0<\/span><\/p>\n Understanding how this happens requires knowing how a mortgage payment is normally split. Every month, part of your payment goes toward interest (the cost of borrowing), and part goes toward principal (the actual loan balance). As rates rise, the interest portion grows, and the principal portion shrinks. At the trigger rate, that principal portion reaches zero.<\/span><\/p>\n \u00a0<\/span><\/p>\n Hitting your trigger rate is a warning sign that your mortgage is no longer working the way it was designed to and that action may eventually be required.<\/span><\/p>\n <\/p>\n –\u00a0<\/span><\/p>\n With a fixed-payment variable-rate mortgage, your monthly payment stays the same even as the interest rate changes. When rates rise, more of each payment is consumed by interest, and less goes toward reducing your balance. At the trigger rate, that shift is complete: the full payment <\/span>covers interest only<\/span><\/a>.<\/span><\/p>\n \u00a0<\/span><\/p>\n Here’s a simple example. Say a homeowner in Hamilton, Ont., took out a $500,000 mortgage with a variable rate and a fixed monthly payment of $2,000. As rates climbed, more and more of that $2,000 went to interest. Once the rate reached the point where $2,000 was needed just to cover the month’s interest charges, they hit their trigger rate, and their mortgage balance stopped shrinking entirely.<\/span><\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” background_color=”#edf7f3″ da_disable_devices=”off|off|off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” header_2_text_align=”center” header_2_text_color=”#38505b” header_2_font_size=”2.63rem” header_2_line_height=”3.75rem” max_width=”800px” module_alignment=”center” header_2_font_size_tablet=”32px” header_2_font_size_phone=”27px” header_2_font_size_last_edited=”on|phone” header_2_line_height_tablet=”3.75rem” header_2_line_height_phone=”32px” header_2_line_height_last_edited=”on|phone” global_colors_info=”{}”]<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” da_disable_devices=”off|off|off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n Not every mortgage carries trigger rate risk. For example, fixed-rate mortgages aren’t affected: the rate is locked in for the term, so the split between interest and principal is predictable throughout.<\/span><\/p>\n \u00a0<\/span><\/p>\n As for variable-rate mortgages, there are two types in Canada, but only <\/span>fixed-payment variable-rate mortgages <\/span><\/i>are exposed to trigger rate risk when rates rise.<\/span><\/p>\n <\/p>\n These keep payments the same while the interest rate fluctuates. According to the<\/span> Bank of Canada<\/span><\/a>, roughly three-quarters of all variable-rate mortgages in Canada have fixed payments.<\/span><\/p>\n \u00a0<\/span><\/p>\n Adjustable-rate mortgages <\/span><\/i>automatically adjust the payment amount when rates change. Because the payment rises with the rate, the principal portion stays intact, meaning there’s no <\/span>trigger rate concern<\/span><\/a> in the same way.<\/span><\/p>\n \u00a0<\/span><\/p>\n If you’re not sure which type you have, check your mortgage agreement or ask your lender directly. Understanding your mortgage type is the first step in knowing whether trigger rates apply to you.<\/span><\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” background_color=”#2F3E52″ custom_padding=”36px||36px|||” da_disable_devices=”off|off|off” global_module=”1351″ saved_tabs=”all” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” header_2_text_color=”#ffffff” header_2_font_size=”2rem” header_2_line_height=”2.5rem” header_2_font_size_tablet=”2rem” header_2_font_size_phone=”1.6rem” header_2_font_size_last_edited=”on|phone” header_2_line_height_tablet=”2.5rem” header_2_line_height_phone=”2.25rem” header_2_line_height_last_edited=”on|phone” global_colors_info=”{}”]<\/p>\n [\/et_pb_text][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_text_color=”#e8db3a” text_font_size=”1.13rem” text_line_height=”2em” custom_margin=”||41px|||” global_colors_info=”{}”]<\/p>\n Listings updated every 15 minutes [\/et_pb_text][wahi_wahiButton url=”https:\/\/wahi.com\/ca\/en\/real-estate\/sign-up” button_color=”#EB7161″ circle_color=”#000000″ focus_color=”#000000″ is_white_hover_text=”on” _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”]Sign UP[\/wahi_wahiButton][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”42px||42px||true|” da_disable_devices=”off|off|off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”||75px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.20.2″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n These two terms are related but distinct, and confusing them can lead homeowners to underestimate their situation.<\/span><\/p>\n \u00a0<\/span><\/p>\n Trigger rate<\/b> is the interest rate (and warning) at which your payment covers interest only, with nothing going toward principal.<\/span><\/p>\n \u00a0<\/span><\/p>\n Trigger point<\/b> is what comes next. Once you’ve passed your trigger rate, your mortgage balance may begin to grow. Your lender sets a maximum allowable balance, often tied to the original loan amount or the home’s appraised value. When the balance grows to hit that ceiling, you’ve reached your trigger point.<\/span><\/p>\n \u00a0<\/span><\/p>\n At the trigger point, your lender can require you to take action. This may mean increasing your regular payments, making a lump-sum payment or renegotiating your mortgage terms. Preparing for extra or higher payments in advance can be helpful.<\/span><\/p>\n \n –<\/span><\/p>\n When you hit your trigger rate, your <\/span>mortgage balance<\/span><\/a> may stop declining. Instead of shrinking toward zero over time, it plateaus. Or, if rates have risen far enough, it starts to grow.<\/span><\/p>\n \u00a0<\/span><\/p>\n That growth is called negative amortization. It means the clock on paying off your home has effectively stopped or is running backwards. If the balance grows significantly, you may face higher required payments at renewal, a longer amortization period or difficulty refinancing your home.<\/span><\/p>\n \u00a0<\/span><\/p>\n Between July 2023 and June 2024, Canadian financial institutions implemented more than 8,000 relief measures for at-risk mortgage holders. This helped borrowers avoid more than <\/span>$4 million in penalties and fees<\/span><\/a>, much of which tied to lump-sum payments made to avoid negative amortization.<\/span><\/p>\n \u00a0<\/span><\/p>\n Hitting your trigger rate is not automatically a crisis. But the sooner you recognize it, the more options you have.<\/span><\/p>\n <\/p>\n Negative amortization happens when a mortgage payment isn’t large enough to cover the interest charged for that period. The shortfall is added to the outstanding loan balance.<\/span><\/p>\n \u00a0<\/span><\/p>\n So, instead of your balance falling month by month, it rises. Over time, that means you owe more than you originally borrowed, the loan takes longer to pay off and you <\/span>pay more interest<\/span><\/a> over the life of the mortgage.\u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n The federal government addressed this risk directly in the <\/span>Canadian Mortgage Charter<\/span><\/a>, introduced in the 2023 Fall Economic Statement, which includes a provision requiring lenders to avoid charging interest on interest during periods of negative amortization.<\/span><\/p>\n \u00a0<\/span><\/p>\n But even with those protections, the underlying problem of a growing mortgage balance makes renewal, refinancing and long-term financial planning significantly harder.<\/span><\/p>\n <\/p>\n Your trigger rate is specific to your mortgage. It depends on your original loan amount, amortization period, payment schedule and current balance. There’s no single number that applies to everyone.<\/span><\/p>\n Here’s how to find yours:<\/span><\/p>\n \u00a0<\/span><\/p>\n <\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” da_disable_devices=”off|off|off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”||75px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.20.2″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n The most important thing homeowners can do is act early. The closer you get to your trigger rate, the fewer options you have, and the more leverage your lender has <\/span>at renewal<\/span><\/a>.<\/span><\/p>\n Here are the most common strategies:<\/span><\/p>\n <\/p>\n<\/li>\n <\/p>\n <\/p>\n<\/li>\n <\/p>\n<\/li>\n –<\/span><\/p>\n Home equity, the difference between what your home is worth and what you owe, plays a big role in how much flexibility you have when dealing with trigger rate pressure.<\/span><\/p>\n \u00a0<\/span><\/p>\n Homeowners with significant equity generally find it easier to refinance or convert to a fixed-rate mortgage: lenders are more willing to work with borrowers who aren’t underwater on their homes. If equity has shrunk, say, because the balance has grown through negative amortization or because home prices have fallen in a local market, options narrow.<\/span><\/p>\n <\/p>\n Knowing your home’s estimated value is a practical starting point for any of those conversations. Wahi’s <\/span>Home Value Estimator<\/span><\/a> can give you a clearer picture of where your property sits in today’s market, which matters whether you’re planning to stay, refinance or explore a move.<\/span><\/p>\n <\/p>\n Hitting your trigger rate doesn’t automatically mean you should sell. For many homeowners, the right move is to work with their lender to stabilize the mortgage and wait for renewal.<\/span><\/p>\n \u00a0<\/span><\/p>\n That said, considering cash flow, renewal timing, mortgage balance, equity and long-term goals is key. Selling is worth exploring if payments have become genuinely unmanageable, renewal terms look prohibitive or you were already considering a move and your equity position is strong enough to make a sale worthwhile.<\/span><\/p>\n \u00a0<\/span><\/p>\n A Wahi REALTOR\u00ae can help you assess local market conditions, get a realistic picture of what your home might sell for and weigh that against your financial situation. Selling is one possible path, but it’s best considered as part of a broader housing and financial plan, not an automatic response to a difficult renewal conversation.<\/span><\/p>\n \u00a0<\/span><\/p>\n If you do decide to sell, it’s also worth understanding the details of selling your house with an existing mortgage, including how a mortgage discharge or payoff quote works.<\/span><\/p>\n <\/p>\n Trigger rates aren’t just a concern for current homeowners. If you’re shopping for a mortgage, the <\/span>type of product<\/span><\/a> you choose will determine your exposure.<\/span><\/p>\n \u00a0<\/span><\/p>\n Before signing, ask your lender or broker whether the mortgage is a fixed-payment variable-rate product or an adjustable-rate mortgage, what your trigger rate would be at the current balance and amortization, and how payments would change if rates rose by 1 or 2%.<\/span><\/p>\n \u00a0<\/span><\/p>\n Building flexibility into your budget\u00a0 so that a payment increase wouldn’t threaten your finances is sound planning regardless of which mortgage you choose.<\/span><\/p>\n \u00a0<\/span><\/p>\nWhat Is a Trigger Rate?<\/h2>\n
How Trigger Rates Work<\/h2>\n
\u201cWhen you hit your trigger rate, your entire monthly payment goes toward interest, and your mortgage balance stays exactly where it is.\u201d<\/b><\/h2>\n
Which Mortgages Are Most Affected by Trigger Rates?<\/strong><\/h2>\n
Sign up to access:<\/h2>\n
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Sold comparables for every listing<\/p>\nTrigger Rate Vs. Trigger Point
<\/strong><\/h2>\nWhat Happens if You Hit Your Trigger Rate?<\/b><\/h2>\n
What Is Negative Amortization?<\/b><\/h2>\n
How to Find Your Trigger Rate<\/b><\/h2>\n
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What Can Homeowners Do if They Are Close to Their Trigger Rate?<\/b><\/h2>\n
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Why Your Home Value Matters<\/b><\/h2>\n
Should You Sell if You Hit Your Trigger Rate?<\/b><\/h2>\n
What Buyers Should Know About Trigger Rates<\/b><\/h2>\n