The trigger point is the moment your lender steps in and tells you: your mortgage balance has grown too much, and you need to do something about it. Unlike the trigger rate — which is a mathematical threshold you may not even notice — the trigger point is a contractual provision that forces action. If you have a fixed-payment variable-rate mortgage and rates have risen significantly, you may be approaching or have already hit your trigger point. Here are your options and how to evaluate each one.
What Triggers the Trigger Point
How Lenders Define It
| Lender | Trigger Point Definition |
|---|---|
| TD | Balance exceeds the original principal amount (i.e., you owe more than you started with) |
| CIBC | Balance exceeds the original principal amount |
| National Bank | Balance exceeds a percentage of property value (varies by contract) |
| Credit unions | Varies widely — check your specific agreement |
Example: Hitting the Trigger Point
| Metric | Value |
|---|---|
| Original mortgage amount | $450,000 |
| Home purchase price | $562,500 |
| Original LTV | 80% |
| Current variable rate | 6.20% |
| Fixed monthly payment (set at 2.50%) | $2,010 |
| Monthly interest at 6.20% | $2,325 |
| Monthly shortfall (negative amortization) | $315 |
| Time to hit trigger point (balance > $450,000) | Already hit — balance grows $315/month |
After approximately 10 months of negative amortization at this shortfall, the balance would have grown to $453,150 — exceeding the original $450,000 and triggering the trigger point at lenders using the “balance exceeds original” definition.
Your Options at the Trigger Point
Option 1: Increase Your Payment
The most common and usually best option.
Your lender will calculate a new payment that covers the current interest charge plus enough principal to properly amortize the mortgage within the remaining term.
| Before Trigger Point | After Payment Increase |
|---|---|
| Payment: $2,010 | Payment: $2,750–$3,100 |
| Interest covered: $2,010 of $2,325 | Interest covered: $2,325 of $2,325 |
| Principal: −$315 (growing) | Principal: +$425–$775 (shrinking) |
The increase can be significant. In the example above, the payment increase of $740–$1,090/month is a 37–54% jump. This is the “payment shock” that made headlines during 2022–2023.
Affordability Check
| Current Monthly Payment | Required New Payment | Increase | Annual Cost Increase |
|---|---|---|---|
| $1,800 | $2,500 | $700 (+39%) | $8,400 |
| $2,100 | $2,900 | $800 (+38%) | $9,600 |
| $2,500 | $3,400 | $900 (+36%) | $10,800 |
| $3,000 | $4,100 | $1,100 (+37%) | $13,200 |
If the new payment is unaffordable, you need to explore other options.
Option 2: Make a Lump Sum Payment
A lump sum reduces your principal balance, which:
- Brings the balance back below the trigger point threshold
- Reduces the monthly interest charge
- May make your existing payment sufficient again
| Lump Sum | New Balance | New Monthly Interest | Existing Payment Covers? |
|---|---|---|---|
| $5,000 | $448,150 | $2,316 | No (still $306 short) |
| $15,000 | $438,150 | $2,264 | No (still $254 short) |
| $30,000 | $423,150 | $2,186 | No (still $176 short) |
| $50,000 | $403,150 | $2,083 | Close (only $73 short) |
| $60,000 | $393,150 | $2,031 | Yes ($2,010 is close) |
In this example, you would need approximately $55,000–$60,000 as a lump sum to make the existing payment viable again at the current rate. This is a large amount of capital, and most borrowers in this situation do not have it readily available.
If you have a lump sum available, combine it with a modest payment increase for the best result.
Option 3: Convert to Fixed Rate
Converting from variable to fixed eliminates the trigger rate/point issue entirely because your rate is locked.
| Factor | Details |
|---|---|
| New rate | Your lender’s current 3 or 5-year fixed rate |
| Penalty | Varies — some lenders convert at no cost; others charge |
| New payment | Calculated at the fixed rate on the current (higher) balance |
| Amortization | Recalculated based on remaining term and new balance |
| Lock-in risk | If rates are falling, you lock in at a peak |
Conversion Example
| Factor | Variable (Current) | Convert to 5-Year Fixed |
|---|---|---|
| Rate | 6.20% (variable) | 5.09% (fixed) |
| Balance | $453,150 | $453,150 |
| Monthly payment | $2,010 (fixed, not covering interest) | $2,680 (fully amortizing at 20 years) |
| Interest covered? | No | Yes — 100% |
| Principal being paid? | No (negative) | Yes — building equity |
The conversion increases your payment but ensures you are properly amortizing. The fixed rate is likely lower than the current variable rate (because fixed rates track bond yields, which may be lower than the Bank of Canada overnight rate).
Option 4: Refinance the Mortgage
Break the mortgage entirely and get a new one — potentially with a different lender.
| Factor | Details |
|---|---|
| Penalty | 3 months’ interest on a variable-rate mortgage |
| Legal fees | $500–1,500 |
| New mortgage | At competitive market rates from any lender |
| Benefit | Clean start; can extend amortization; shop for best rate |
| Potential issue | If your home has lost value, you may not qualify for the same amount |
Penalty Calculation
| Balance | Variable Rate | 3 Months’ Interest Penalty |
|---|---|---|
| $453,150 | 6.20% | $453,150 × 6.20% ÷ 4 = $7,024 |
Total cost to refinance:
- Penalty: $7,024
- Legal fees: ~$1,200
- Total: ~$8,224
This is much cheaper than a fixed-rate IRD penalty (which can be $15,000–$40,000+). It may be worthwhile if you can get a significantly better rate from another lender.
Option 5: Extend the Amortization
Some lenders will re-amortize the mortgage over a longer period, keeping your payment manageable.
| Amortization | Payment ($453,150 at 6.20%) |
|---|---|
| 20 years (remaining) | $3,305 |
| 25 years | $3,010 |
| 30 years | $2,790 |
Important: Extending the amortization means paying significantly more interest over the life of the mortgage. Extending from 20 to 30 years on $453,150 at 6.20% adds approximately $135,000 in total interest.
This option may not be available at all lenders, and it may require a formal refinance (with penalty and fees) rather than a simple modification.
Decision Framework
Which Option Is Best for You?
| Your Situation | Recommended Option |
|---|---|
| Can afford higher payments | Increase payment — cheapest long-term |
| Have significant savings/investments | Lump sum + modest payment increase |
| Rates are high and expected to fall | Increase payment (not convert to fixed) — wait for variable to drop |
| Rates appear to have peaked | Convert to fixed — lock in before potential correction |
| Want to switch lenders | Refinance — penalty is only 3 months’ interest on variable |
| Cannot afford any increase | Extend amortization — last resort |
| Cannot afford ANY solution | Seek professional advice — mortgage broker or financial counselor |
What Your Lender’s Letter Will Say
When you hit the trigger point, you will receive a letter or notification. It typically includes:
| Information | What It Means |
|---|---|
| Your current balance | How much you owe now |
| Your original balance | For comparison |
| Amount above trigger point | The excess (e.g., $3,150 above original) |
| Required action | What the lender expects you to do |
| Options available | Usually 2–3 choices |
| Deadline | Typically 30–60 days to respond |
| Consequence of inaction | Lender may unilaterally increase your payment |
Do not ignore this letter. If you do not respond, most lenders will automatically increase your payment to a fully amortizing level — which could be a significant payment shock if you are unprepared.
Timeline: How Long Until the Trigger Point?
If you are in negative amortization but have not yet hit the trigger point, here is how quickly you will get there based on the monthly shortfall:
| Monthly Shortfall | Months to Trigger Point ($450K balance) | Months to Trigger Point ($600K balance) |
|---|---|---|
| $100 | ~0 months (already there) | ~0 months |
| $200 | ~0 months | ~0 months |
| $300 | ~0 months | ~0 months |
| $500 | ~0 months | ~0 months |
At most lenders using the “balance exceeds original” definition, you hit the trigger point the moment your balance exceeds the original amount — which happens after just one month of negative amortization. This means the trigger rate and trigger point are effectively hit at nearly the same time for many borrowers.
At lenders using a higher LTV threshold (e.g., 80% of home value), there may be more room before the trigger point is hit — especially if the home has appreciated.
Preventing Future Trigger Point Issues
| Strategy | How It Helps |
|---|---|
| Choose adjustable-payment variable | No trigger rate or point — payments auto-adjust |
| Overpay from the start | Set initial payment 15–20% above the minimum |
| Monitor rates monthly | Proactively increase payments before hitting the trigger |
| Maintain emergency fund | Have 3–6 months of mortgage payments saved |
| Consider hybrid mortgage | Part fixed, part variable splits the risk |