Loan Constant Calculator
Convert interest rate and amortization into a loan constant (also called a mortgage constant or debt constant), then translate it into annual debt service, monthly payment, DSCR, and debt yield.
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How it works
Follow the underwriting path lenders use: input the deal, apply constraints, then read the result.
Enter rate and amortization
The loan constant depends on only two inputs: the interest rate and the amortization schedule. The calculator converts them into the annual payment required per dollar of loan. Choose interest-only and the constant simply equals the rate, because the payment contains no principal.
Loan Constant Formula
The loan constant is annual debt service divided by the loan amount, expressed as a percentage. It tells you what share of the original balance must be paid every year — principal and interest combined — to keep the loan on schedule. Because an amortizing payment always includes some principal, the constant on an amortizing loan is always higher than the interest rate; the gap between the two is effectively the annual principal paydown in year one. On an interest-only loan there is no principal component, so the loan constant equals the interest rate exactly. The constant only behaves as a fixed number on fixed-rate loans — with a floating rate, debt service moves and there is no single constant. Lenders lean on the constant because it converts between loan dollars and payment dollars in one step: annual debt service is simply loan amount times constant, and maximum loan proceeds at a DSCR floor are NOI divided by the minimum DSCR and then by the constant. It also connects debt yield and DSCR on matching income and balance bases. See the loan constant guide for monthly-payment assumptions and examples.
Read the calculation methodology and limitations.
Loan Constant = Annual Debt Service / Loan Amount
DSCR = Debt Yield / Loan Constant
Max Loan by DSCR = (NOI / Minimum DSCR) / Loan Constant
Annual Debt Service = Monthly Payment x 12
Monthly Payment = P x [r(1+r)^n] / [(1+r)^n - 1]
Interest-Only Constant = Interest RateA $1,000,000 loan at 6.00% with 20-year amortization requires about $85,972 of annual payments, so the loan constant is roughly 8.60%. The same loan structured interest-only would have a 6.00% constant.
See This Calculator in Action
Explore institutional underwriting examples. Load any scenario into the live calculator with one click to customize rates, amortization, and property valuation.
Permanent loan constant
Loan Constant = Annual Debt Service / Loan AmountThe property must generate about $758,500 of annual debt service capacity per $10M borrowed. That figure feeds directly into DSCR.
Underwriting Metric Comparison & Lender Sizing Standards
Compare debt yield against DSCR and LTV constraints, and review typical sizing assumptions across lender types.
Loan constant vs related CRE metrics
4 Core Sizing TestsAnnual Debt Service / Loan AmountTotal annual cost of debt, principal plus interest
Interest / Loan AmountInterest cost only, ignores principal
NOI / Loan AmountIncome cushion against the loan balance
NOI / Property ValueUnlevered property yield
| Metric | Formula | What It Measures |
|---|---|---|
| Loan Constant | Annual Debt Service / Loan Amount | Total annual cost of debt, principal plus interest |
| Interest Rate | Interest / Loan Amount | Interest cost only, ignores principal |
| Debt Yield | NOI / Loan Amount | Income cushion against the loan balance |
| Cap Rate | NOI / Property Value | Unlevered property yield |
How the loan constant links the other metrics
4 Lender CategoriesLoan x Loan ConstantYes
Debt Yield / Loan ConstantYes
(NOI / Min DSCR) / Loan ConstantYes
Positive when cap rate exceeds the constantYes
| Question | Shortcut | Uses the Constant? |
|---|---|---|
| What is annual debt service? | Loan x Loan Constant | Yes |
| What is DSCR? | Debt Yield / Loan Constant | Yes |
| What is the max loan at a DSCR floor? | (NOI / Min DSCR) / Loan Constant | Yes |
| Is leverage accretive? | Positive when cap rate exceeds the constant | Yes |
Worked examples
| Scenario | Calculation | Result |
|---|---|---|
| 30-year amortization | 6.50% rate, 30-year schedule | ≈7.58% loan constant |
| 25-year amortization | 6.50% rate, 25-year schedule | ≈8.10% loan constant |
| Interest-only structure | 6.50% rate, no principal paydown | 6.50% loan constant (equals the rate) |
| Dollars of debt service | $10,000,000 loan x 7.58% constant | ≈$758,500 annual debt service (≈$63,200 per month) |
| Full credit check | $1,200,000 NOI, $12,000,000 loan at 6.50% / 30 years | ≈1.32x DSCR and 10.00% debt yield |
Conversion reference
| Interest Rate | 30-Year | 25-Year | 20-Year | Interest-Only |
|---|---|---|---|---|
| 5.50% | ≈6.81% | ≈7.37% | ≈8.25% | 5.50% |
| 6.00% | ≈7.19% | ≈7.73% | ≈8.60% | 6.00% |
| 6.50% | ≈7.58% | ≈8.10% | ≈8.95% | 6.50% |
| 7.00% | ≈7.98% | ≈8.48% | ≈9.30% | 7.00% |
| 7.50% | ≈8.39% | ≈8.87% | ≈9.67% | 7.50% |
| 8.00% | ≈8.81% | ≈9.26% | ≈10.04% | 8.00% |
| 8.50% | ≈9.23% | ≈9.66% | ≈10.41% | 8.50% |
Quick facts
- The loan constant is always higher than the interest rate on an amortizing loan, because payments include principal.
- On an interest-only loan the loan constant equals the interest rate.
- At roughly 6%-7% rates with 25- or 30-year amortization, CRE loan constants typically land between about 7.2% and 8.5%.
- Max loan at a DSCR floor = (NOI / minimum DSCR) / loan constant.
- DSCR = debt yield / loan constant, which is why the constant is the bridge between the two lender tests.
Editorial Team
Commercial Real Estate Finance Reviewers
- Calculations reviewed against standard CRE lending formulas for DSCR, LTV, cap rate, and debt yield
- Methodology cross-checked against lender-style loan sizing using NOI, value, loan constant, DSCR, LTV, and debt yield
Our editorial team builds and reviews commercial real estate finance calculators around the way lenders actually size debt: property income, collateral value, annual debt service, and lender risk thresholds. Results are educational screening estimates, not loan quotes, tax advice, legal advice, or a commitment to lend.
Methodology: formulas are calculated from borrower-entered inputs using standard CRE underwriting relationships for NOI, debt yield, DSCR, LTV, cap rate, loan constant, and maximum loan proceeds.
Reviewer note: pages are reviewed for formula accuracy and updated when lender benchmarks or site methodology changes.
Disclaimer: results are educational estimates only and are not financial, legal, tax, valuation, or lending advice.
Frequently asked questions
The loan constant — also called a mortgage constant — is annual debt service divided by the total loan amount, expressed as a percentage. It shows what share of the original loan balance must be paid each year, principal and interest combined, to keep the loan on its scheduled repayment path.
Yes. Debt constant, loan constant, and mortgage constant all refer to the same ratio: annual debt service divided by loan amount. CRE lenders and analysts use the terms interchangeably.
Compute the monthly payment from the rate and amortization using standard mortgage math, multiply by 12 to get annual debt service, then divide by the loan amount. For example, a $1,000,000 loan at 6.00% amortizing over 20 years carries about $85,972 of annual payments, which is roughly an 8.60% constant.
Because an amortizing payment repays principal on top of interest. The shorter the amortization, the larger the principal component and the higher the constant. Only an interest-only loan has a constant equal to its rate.
It depends entirely on rate and amortization. Using hypothetical 6%-7% fixed rates, a 30-year amortization produces constants of roughly 7.2%-8.0%, and a 25-year amortization roughly 7.7%-8.5%. Shorter schedules push the constant higher.
They divide NOI by the minimum DSCR to get maximum supportable annual debt service, then divide by the loan constant to convert that payment capacity into loan proceeds. Use the actual required DSCR and underwriting payment basis; the resulting limit is still subject to LTV, debt yield and other conditions.
Comparing the two is a quick leverage test. When the cap rate is above the loan constant, the property earns more per dollar of value than the debt costs per dollar borrowed, so leverage is typically accretive to cash-on-cash returns. When the constant exceeds the cap rate, borrowing drags returns down.
Not cleanly. The constant assumes a fixed payment schedule, so it only holds for fixed-rate loans. For floating-rate debt, underwriters usually test the constant at a stressed or capped rate instead.