One of the most important things to understand is your trigger rate. This is the interest rate which your mortgage or loan payment will no longer cover principal and interest due for that period. Once you have reached the trigger rate, your payment will only cover interest payments and no money will go toward paying down your principal.
At this point, you have stopped paying down your loan and you are now borrowing more money, resulting in what’s called a “negative amortization.” It’s important to know what this number is so that you can monitor your payments. If you are not paying down enough on the principal during each payment period, then it may take longer than expected to pay off your loan or mortgage, and cost you more money.