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What is a Trigger Rate and how is it affecting me?

With steady rises in interest rates, the term “trigger rate” is commonly used to describe what is happening to mortgages. We checked in with Lorrie at Smart Mortgage Solutions in Cochrane to see what this means and how it is affecting Albertans.

So what is a Trigger Rate?

A Trigger Rate occurs at the point at which your regular mortgage payment is no longer enough to pay all the interest you accrued since your last payment. A trigger point occurs when you can no longer carry on with the same monthly payment you have been making.

Do all mortgages have trigger rates?

There are two main types of mortgages. Fixed mortgages are unaffected by changes to the prime lending rate. The second type is a variable mortgage, which floats with prime. If you have a fixed payment within your variable rate, you can hit a trigger point. On an adjustable-rate mortgage, you have nothing to worry about, your payment adjusts automatically.

The issue with some of the big banks, is they set up mortgages like this in the first place. They just don’t get the “human” aspect of it, that’s where we come in. I wouldn’t set up a fixed-rate variable mortgage for myself, so I don’t advise it for clients.

Lorrie Rasmussen, Mortgage Broker
The founder behind the most human mortgage comany

Increases to prime last year have made my payments out of reach, is there anything I can do?

Yes! You do have options. We can help you to lock in your interest rate, or we can look at extending your amortization for a short term. Sometimes it’s best to simply increase your payment for a while. Calling me first is the right call, to see what option would best fit your specific needs for the short term and long term.

Is the cost of breaking my mortgage worth it or should I just ride it out?

Depending on how large the penalty is and how long it will take to break even on the amount you paid, sometimes it is worth it. We take a look at the rates being offered by your lender, and then compare the rate with all the lenders. From there, we can make an informed decision of what will be the best for you.

There are many strategies that need to be reviewed here, so best is to reach out and book a call.

I’d like to chat with someone to see what my options are, can you help?

First off, we understand that you need to speak to a person. We consider ourselves the most human mortgage company in Alberta. We take the time to get to know you and your entire financial picture. This way, we can go over what makes sense financially for YOU. We can help find a way to relieve the stress of having to pay more than you wanted to.

Since 2005, Lorrie Rasmussen and her team have been here for Albertans. Whether you’re in the market for a brand new mortgage or you want to look at refinancing, Lorrie and her team work with you to find the best solution available.

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