The loan (mortgage) constant is annual debt service per dollar borrowed. Enter your rate and amortization to get it, then use it to size supportable debt.
Annual debt cost per $1 borrowed.
The loan constant (or mortgage constant) is the annual debt service divided by the original loan amount — the percentage of the loan you pay each year covering both principal and interest. It rolls your interest rate and amortization period into a single number.
Loan constant = annual debt service ÷ loan amount. From rate and amortization, the annual constant is the monthly payment factor times twelve. Example: a 7.5% rate amortized over 25 years gives a constant of about 8.87% — so a $10,000,000 loan costs roughly $887,000 a year in debt service.
It lets you size supportable debt directly from NOI. Supportable annual debt service = NOI ÷ target DSCR; divide that by the loan constant and you get the supportable loan amount. It's the bridge between operating income and how much a lender will actually advance.
The interest rate is only the cost of borrowing; the loan constant also includes principal amortization, so it's always higher than the rate on an amortizing loan (and equal to the rate on an interest-only loan). Comparing constants, not rates, is the right way to compare amortizing loans.