What Is a Trigger Rate and Do You Need To Worry About It?

Carola Singer • December 7, 2022

This is going to be the last time we’re talking about interest rates and mortgages this year. And if we’re happy about it, you’re likely ecstatic.


So, let’s get to today’s topic: what is a trigger rate and do you need to worry about it?


Brief Recap of Variable Rate Mortgages


We’ve covered this previously, but just so we’re all starting from the same page.


A variable rate mortgage means your interest rate is dependent on the Prime rate. Prime rate is the interest rate used by your lender or bank when lending to clients and is related to the Bank of Canada’s overnight lending rate.


When Bank of Canada rates go up, Prime Rates go up, and the interest you pay on your variable-rate mortgage also goes up. This interest payment can be paid in two ways:



  • Static Variable Rate Mortgage: Your monthly payment remains the same, but more of that payment goes towards interest.
  • Adjustable Rate Mortgage: Your monthly payment will increase when there is an increase in rates. Your principal payment will remain the same.


That was the shortest explanation of those two products we’ve ever done…might have to stick to that format.


Trigger Rates with Static Variable Rate Mortgage


The trigger rate is something that impacts static variable-rate mortgage holders. It’s the point at which your regular payment is no longer paying any principal; you’re just paying interest.


Definitely a ‘triggering’ situation.


When you reach this trigger rate, there’s an increase in the balance owed on your mortgage. This is because your payment is no longer enough to cover the cost of borrowing.


Any amount still owing is deferred interest to be paid at a later date.


But if you’re asking, “well, what is my trigger rate?” you’re going to have to give your trusted mortgage broker a call. Your trigger rate will be different from your neighbour’s, your cousin twice removed, and your niece who just bought her first house.


What Do You Do If You’ve Reached Your Trigger Rate?


According to a report by the Bank of Canada, “roughly half of all mortgage holders with static-payment variable-rate mortgages have already reached their trigger rate.”


Simply, you could leave your payment the way that it is, making interest-only payments until rates decrease.


But, we don’t recommend that.


You don’t want to be owing more on your mortgage, which will demand a higher interest payment down the road, even if (and when) rates come down. When this happens, you actually start to go backward on your amortization.


This is called ‘negative amortization’ and means that the principal payments are negative. Your mortgage balance increases each month in order to cover the interest cost.


Talk with your mortgage broker about how you can increase your monthly payment or change your payment schedule to make it more manageable.


Because you’re a variable-rate holder, it’s easier to break your mortgage if you need to refinance or move to a fixed-rate mortgage.


And don’t wait until you think rates will go down.


Rates are unpredictable to even those who make it their job to predict them. Reach out to a mortgage broker now if you’re coming up to your trigger rate.


We Have To Mention Trigger Point


Not to add more mud to the muddy waters, but alongside the trigger rate, there’s a trigger point.


A trigger point is when the balance on your mortgage is back at or exceeds the amount you borrowed when you first got your mortgage.


This could also be described as a percentage of your home’s value. For example, if your mortgage balance is over 100% of your home’s value, you’re at your trigger point.


Most lenders in Canada will use a trigger point of when the principal amount plus interest owing exceeds 80% of the fair market value.


When you reach this point, it’s going to trigger an action (see what we did there?)


Your lender is going to ask that you either increase your monthly payment, make a lump-sum payment, convert to a fixed rate or refinance to extend your amortization.


If you have any questions, please connect with me anytime!


This article was originally published on the Quantis Mortgage Solutions Website here.

RECENT POSTS 

Home Reno Dreams? Let’s Talk Mortgage Financing

By Carola Singer • February 11, 2026
How to Use Your Mortgage to Finance Home Renovations Home renovations can be exciting—but they can also be expensive. Whether you're upgrading your kitchen, finishing the basement, or tackling a much-needed repair, the cost of materials and labour adds up quickly. If you don’t have all the cash on hand, don’t worry. There are smart ways to use mortgage financing to fund your renovation plans without derailing your financial stability. Here are three mortgage-related strategies that can help: 1. Refinancing Your Mortgage If you're already a homeowner, one of the most straightforward ways to access funds for renovations is through a mortgage refinance. This involves breaking your current mortgage and replacing it with a new one that includes the amount you need for your renovations. Key benefits: You can access up to 80% of your home’s appraised value , assuming you qualify. It may be possible to lower your interest rate or reduce your monthly payments. Timing tip: If your mortgage is up for renewal soon, refinancing at that time can help you avoid prepayment penalties. Even mid-term refinancing could make financial sense, depending on your existing rate and your renovation goals. 2. Home Equity Line of Credit (HELOC) If you have significant equity in your home, a Home Equity Line of Credit (HELOC) can offer flexible funding for renovations. A HELOC is a revolving credit line secured against your home, typically at a lower interest rate than unsecured borrowing. Why consider a HELOC? You only pay interest on the amount you use. You can access funds as needed, which is ideal for staged or ongoing renovations. You maintain the terms of your existing mortgage if you don’t want to refinance. Unlike a traditional loan, a HELOC allows you to borrow, repay, and borrow again—similar to how a credit card works, but with much lower rates. 3. Purchase Plus Improvements Mortgage If you're in the market for a new home and find a property that needs some work, a "Purchase Plus Improvements" mortgage could be a great option. This allows you to include renovation costs in your initial mortgage. How it works: The renovation funds are advanced based on a quote and are held in trust until the work is complete. The renovations must add value to the property and meet lender requirements. This type of mortgage lets you start with a home that might be more affordable upfront and customize it to your taste—all while building equity from day one. Final Thoughts Your home is likely your biggest investment, and upgrading it wisely can enhance both your comfort and its value. Mortgage financing can be a powerful tool to fund renovations without tapping into high-interest debt. The right solution depends on your unique financial situation, goals, and timing. Let’s chat about your options, run the numbers, and create a plan that works for you. 📞 Ready to renovate? Connect anytime to get started!

Fixed vs. Variable Mortgage Rates in Canada

By Carola Singer • February 4, 2026
Fixed vs. Variable Rate Mortgages: Which One Fits Your Life? Whether you’re buying your first home, refinancing your current mortgage, or approaching renewal, one big decision stands in your way: fixed or variable rate? It’s a question many homeowners wrestle with—and the right answer depends on your goals, lifestyle, and risk tolerance. Let’s break down the key differences so you can move forward with confidence. Fixed Rate: Stability & Predictability A fixed-rate mortgage offers one major advantage: peace of mind . Your interest rate stays the same for the entire term—usually five years—regardless of what happens in the broader economy. Pros: Your monthly payment never changes during the term. Ideal if you value budgeting certainty. Shields you from rate increases. Cons: Fixed rates are usually higher than variable rates at the outset. Penalties for breaking your mortgage early can be steep , thanks to something called the Interest Rate Differential (IRD) —a complex and often costly formula used by lenders. In fact, IRD penalties have been known to reach up to 4.5% of your mortgage balance in some cases. That’s a lot to pay if you need to move, refinance, or restructure your mortgage before the end of your term. Variable Rate: Flexibility & Potential Savings With a variable-rate mortgage , your interest rate moves with the market—specifically, it adjusts based on changes to the lender’s prime rate. For example, if your mortgage is set at Prime minus 0.50% and prime is 6.00% , your rate would be 5.50% . If prime increases or decreases, your mortgage rate will change too. Pros: Typically starts out lower than a fixed rate. Penalties are simpler and smaller —usually just three months’ interest (often 2–2.5 mortgage payments). Historically, many Canadians have paid less overall interest with a variable mortgage. Cons: Your payment could increase if rates rise. Not ideal if rate fluctuations keep you up at night. The Penalty Factor: Why It Matters More Than You Think One of the biggest surprises for homeowners is the cost of breaking a mortgage early —something nearly 6 out of 10 Canadians do before their term ends. Fixed Rate = Unpredictable, potentially high penalty (IRD) Variable Rate = Predictable, usually lower penalty (3 months’ interest) Even if you don’t plan to break your mortgage, life happens—career changes, family needs, or new opportunities could shift your path. So, Which One is Best? There’s no one-size-fits-all answer. A fixed rate might be perfect for someone who wants stable budgeting and plans to stay put for years. A variable rate might work better for someone who’s financially flexible and open to market changes—or who may need to exit their mortgage early. Ultimately, the best mortgage is the one that fits your goals and your reality —not just what the bank recommends. Let's Find the Right Fit Choosing between fixed and variable isn’t just about numbers—it’s about understanding your needs, your future plans, and how much financial flexibility you want. Let’s sit down and walk through your options together. I’ll help you make an informed, confident choice—no guesswork required.