There are a few ways to prepare if your mortgage is approaching your trigger rate. The first most obvious step is to adjust your spending habits.There are a few ways to prepare if your mortgage is approaching your trigger rate. The first most obvious step is to adjust your spending habits.

Experts say the key is to be proactive and prepare your finances well before your entire mortgage payment is going towards paying just the interest.

Recent interest rate hikes have been tough on homeowners, especially borrowers with variable rate mortgages who have either hit or are nearing their trigger rates.

The trigger rate is the point at which your mortgage payment goes toward interest and none of it to your principal. But how does it affect your mortgage?

Interest rate hikes don’t necessarily result in higher mortgage payments, says Zolo Realty spokesperson Jordann Kaye. Instead, more of your mortgage payment goes toward the interest.

Kaye says if you hit your trigger rate, your lender or mortgage broker will inform you that your payments need to be larger to pay down your mortgage. From there, you’ll receive some options for continuing as a borrower.

The best thing to do is to prepare your finances well before you reach your trigger rate, Kaye says.

Jason Heath, managing partner at Objective Financial Partners, agrees. “All people can find a way to make other cuts in their budget to make ends meet,” he says. “This is part of the economic cycle, unfortunately.”

There are a few ways to prepare if you are approaching your trigger rate, Kaye says.

It sounds obvious, but the first step is to adjust your spending habits, push back big-ticket purchases, like a car. Next, she recommends building an interest rate reserve, or an emergency fund specifically for rising rates. Third, try to make a lump-sum payment. This will bring your mortgage balance down enough to prevent you from having to make larger monthly payments down the road.

“You can look at the consequences of taking all of these steps before you hit your trigger rate,” says Kaye. “It ensures that you are prepared for when it does happen,” she says.

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