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The trigger point is the outstanding balance threshold for a variable-rate mortgage — set by the lender’s contract, often near the original principal amount — that, once crossed through negative amortization, requires the lender to take action to bring the loan back under control.
The two terms describe the same problem from two different angles. The trigger rate is an interest-rate threshold — the rate at which a fixed payment stops covering any principal. The trigger point is a dollar-balance threshold: once unpaid interest has capitalized onto the mortgage enough to push the outstanding balance past the lender’s defined limit, the trigger point has been reached.
The exact trigger point is lender-specific and defined in the mortgage contract; it’s commonly set as a percentage of the original principal rather than the full original amount. Once it’s reached, the lender is typically required to act — raising the payment, requesting a lump-sum prepayment, or converting the mortgage to a fixed rate — with the exact response varying by lender.
Set by contract: each lender defines its own trigger point in the mortgage agreement; there is no single industry-wide figure.
Affects static-payment VRMs: this concept applies to variable-rate mortgages with a fixed payment amount, not products where the payment itself floats with prime.
Regulatory attention: OSFI's Guideline B-20 has pushed federally regulated lenders to actively monitor and manage interest-rate risk for borrowers approaching their trigger point.
Consequence of inaction: left unaddressed, a mortgage past its trigger point continues growing rather than shrinking — see negative amortization.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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