Hi all,

I see there have been lots of posts on the trigger point, but I couldn't find this exact question answered as to what is financially smarter/saner to do when we are about to hit the trigger point and the rates are expected to keep increasing.

Our mortgage rate was 1.39 and now is 3.64. Amortization was 30 years, now is 56 years! Bank told me that at this point we are paying almost interest only (almost at trigger point). Based on my understanding we have these options:

1. Switch to Fixed: This will be a jump in interest rate, so naturally the monthly payment will jump. I got a Fixed offer for 5.54%.
2. Refinance: Not sure if this is different than the previous option, but I assume if we have less years left on the mortgage, we can leverage this to span the mortgage out? We are not in that situation as we just started our mortgage last year so I won't go into this option
3. Increase monthly payment: Keep the rate variable and pay more out of pocket (or pay lump sum) to make up toward the principal amount. This can delay the trigger point
4. Do nothing: Continue making interest only payments. At trigger point monthly payment goes up and we continue making interest only payments. Difference with option 3 is that I don't pay toward principal at all.

In the past, I have heard suggestions like "make interest-only payments" here at PFC but I want to understand what is financially smarter, assuming selling the house is not an option and we can go higher on monthly payment up to some degree.

Of course we don't have unlimited money, and I have to do some calculation to see whether we have the option to go to Fixed payment, but wanted to know what are some decision factors I need to consider between going to Fixed, letting mortgage hit trigger point, or making lump sum or extra monthly payments.

If this question has been answered elsewhere, sharing the link will also help to avoid repeating an answer.

Thanks

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Edit: Went from 3 options to 4 options and tried to clarify them better.

Edit 2: called up the bank, found out RBC will only increase the payment to cover up for the interest. So that’s not too bad either. I’m contemplating between letting it be, and increasing a minor amount so that eventual renewal would be easier.