Trigger Rate

On a variable-rate mortgage with fixed payments, there is a rate at which your whole payment goes to interest and nothing touches the balance. That is the trigger rate. Cross it and your mortgage starts growing while you keep paying. This calculator finds yours.

What it answers

• Your personal trigger rate, from your balance and your fixed payment.
• How close current rates are to it — your margin of safety.
• What happens month by month past the trigger: exactly how much is added to your balance.

What it deliberately does not cover

It applies only to variable-rate mortgages with fixed payments. If your payment already moves with every rate change, you have no trigger rate — the payment simply adjusts. It does not forecast rates, does not model fixed-rate mortgages, and does not calculate penalties for switching products to escape the trigger.

Every input, explained

Current mortgage balance. What you owe right now, from your statement or lender portal. The trigger rate shifts as the balance shifts — every principal payment nudges it, as the math section shows.

Fixed monthly payment. The payment set when you took the mortgage or last renewed the variable term, from your mortgage commitment. The common error is entering a payment from a different product or an outdated statement.

Current variable rate. Your rate today, from your lender's portal. Enter your actual rate — prime plus or minus your discount — not the prime rate itself.

How the math works

Monthly interest = balance × annual rate ÷ 12. The trigger rate is where that interest exactly equals your fixed payment, leaving zero for principal.

Trigger rate = fixed payment × 12 ÷ balance.

Below it, part of each payment shrinks the balance. At it, the balance stands still. Above it, unpaid interest is added to the balance — negative amortization.

The subtle part: as the balance falls, the same payment covers interest on a smaller debt, so the trigger rate rises over time. A $2,960 payment on a $615,000 balance triggers near 5.78 percent; once payments bring the balance to $500,000, the same payment does not trigger until about 7.10 percent. Time is on your side — which is why the danger is greatest early in the term.

Lenders handle a breach differently. Some raise your payment automatically. Some let the balance grow to a ceiling — often the original loan amount — then force a payment increase or lump sum. Your mortgage documents say which. Read them before you need them.

Worked example

A Mississauga borrower holds a fixed-payment variable mortgage: $615,000 balance, $2,960 monthly payment (set when the rate was about 3.2 percent), current variable rate 4.85 percent.

Trigger rate: 2,960 × 12 ÷ 615,000 = 35,520 ÷ 615,000 = 0.05776, about 5.78 percent.

Margin of safety: 5.78 − 4.85 = 0.93 percentage points. Rates must rise nearly a full point before the payment stops reducing the balance. Uncomfortable, not imminent.

Now suppose the rate rises the full point the calculator tests, to 5.85 percent — just past the 5.78 percent trigger. Monthly interest: 615,000 × 0.0585 ÷ 12 = $2,998.13 against a $2,960 payment. Shortfall: about $38 added to the balance every month, shown as the calculator's "Monthly shortfall if rates rise 1%" line. It looks small because this scenario only just crosses the trigger — but run it forward and it still compounds, because next month's interest is charged on the larger balance. The calculator does this for you: assuming the rate holds at 5.85 percent for the full year, its "Balance added after 12 months if the rate stays at +1%" line shows $470 added to the debt. That figure is a hypothetical anchor, not a forecast — real rates move, and most borrowers raise the payment, pay a lump sum, or convert to fixed well before a full year passes.

The exits, roughly in order of cost: raise the payment voluntarily before the trigger hits; make a lump sum to cut the balance (which also lifts the trigger rate); or convert to fixed. Each has trade-offs — run them against your own numbers, not rules of thumb.

Provincial quirks and edge cases

• The trigger rate math is identical in every province. What differs is the contract language around it, which follows your lender, not your location.
• Quebec borrowers converting variable to fixed through a notary-registered hypothec may face fresh notary fees if re-registration is required — confirm before converting.
• Converting to fixed with the same lender on an insured mortgage is straightforward; switching lenders to convert usually means re-qualifying under the stress test at the greater of the contract rate plus two points or the 5.25 percent floor.
• Collateral charge holders switching products with the same lender generally avoid re-registration. It is switching lenders, not switching products, that triggers the heavy paperwork.

Questions to ask a professional

1. Ask your lender: "Under my contract, what happens at the trigger rate — automatic payment increase, balance growth to a ceiling, or a required lump sum?"
2. Ask your mortgage broker: "Given my trigger rate and today's rates, is converting to fixed cheaper than riding the variable — and what does conversion cost?"
3. Ask your lender: "If I make a lump-sum payment now, how does my trigger rate change, and what prepayment limits apply?"
4. Ask your broker: "My payment is fixed but rates are rising — should I voluntarily increase my payment now, and is there any fee to do so?"