What Is a Loan Constant? The Mortgage Constant Table for Apartment Loans
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The loan constant (also called the mortgage constant) is one year of loan payments divided by the loan amount: loan constant = yearly debt service ÷ loan amount. It is the share of the loan you pay each year, principal and interest together. A $5,000,000 loan at 6.5% on a 30 year schedule costs about $379,241 a year, a loan constant of about 7.58%. On interest-only payments, the constant equals the interest rate.
This post is part of our guide to real estate syndication. It gives the formula, a table of constants and the three places sponsors use them. Figures are as of November 2026.
What is the formula?
For a fully amortizing loan with monthly payments:
loan constant = 12 × r ÷ (1 − (1 + r)^−n)
where r is the monthly rate (the yearly rate ÷ 12) and n is the number of monthly payments. A spreadsheet does it in one step: =PMT(rate/12, years*12, -1) * 12 gives the constant for a loan of $1.
Loan constant table
Yearly loan constant by rate and amortization, monthly payments:
| Rate | 25 years | 30 years | 35 years | Interest only |
|---|---|---|---|---|
| 5.0% | 7.02% | 6.44% | 6.06% | 5.00% |
| 5.5% | 7.37% | 6.81% | 6.44% | 5.50% |
| 6.0% | 7.73% | 7.19% | 6.84% | 6.00% |
| 6.5% | 8.10% | 7.58% | 7.25% | 6.50% |
| 7.0% | 8.48% | 7.98% | 7.67% | 7.00% |
| 7.5% | 8.87% | 8.39% | 8.09% | 7.50% |
Notice that a 6.0% loan on a 25 year schedule (7.73%) costs more each year than a 6.5% loan on a 30 year schedule (7.58%). The rate alone would have pointed the other way.
Where do sponsors use it?
1. Sizing the loan. Lenders limit the payment to NOI divided by a minimum DSCR. Divide that payment by the constant to get the maximum loan. With $650,000 of NOI, a 1.25x minimum and a 7.58% constant: $650,000 ÷ 1.25 ÷ 7.58% is about $6,856,000. See how lenders size an apartment loan and DSCR loans.
2. Testing leverage. Compare the cap rate with the constant. A building at a 6.0% cap rate with a 7.58% constant has negative leverage: the debt lowers cash-on-cash return. See negative leverage.
3. Comparing loan quotes. Two quotes with different rates, amortization and interest-only periods are easier to compare on their constants, year by year. Add fees and the prepayment terms; see fixed vs floating rate loans and loan closing costs.
What about interest-only periods?
During an interest-only period, the constant equals the rate, so it is lower and DSCR looks higher. When amortization starts, the constant jumps to the amortizing figure in the table. On a 6.0% loan with a 30 year schedule, that is a move from 6.00% to 7.19%, a payment increase of about 20%. See interest-only periods.
How DoorRaise fits in
DoorRaise does not lend or arrange loans. It helps sponsors raise the equity for apartment buildings with 5 or more units from their friends and followers, and computes the deal page's projections, including the loan payments, from the sponsor's loan terms. DoorRaise forms the deal's LLC, prepares the offering documents, files Form D and verifies every investor's accreditation, in 506(b) and 506(c) deals. Investors fund by wire into escrow at Enterprise Bank & Trust. DoorRaise charges two flat fees: $1,500 to set up (non-refundable) and $5,000 a year for administration, the first year paid at closing from the money raised and only if the deal closes.
Check your loan's payment and coverage with the free cap rate and DSCR calculator, then start your deal.
FAQ
What is a loan constant in real estate?
It is the yearly loan payment, principal and interest, divided by the loan amount. It shows the yearly cash cost of each dollar borrowed.
How do you calculate a mortgage constant?
Divide one year of payments by the loan amount, or use 12 × r ÷ (1 − (1 + r)^−n) with the monthly rate r and the number of payments n. In a spreadsheet, =PMT(rate/12, years*12, -1)*12.
What is the loan constant on an interest-only loan?
It equals the interest rate, because no principal is paid.
Why compare the cap rate with the loan constant?
If the cap rate is higher, borrowing raises the cash return on equity; if the constant is higher, borrowing lowers it.
Is a lower interest rate always a lower loan constant?
No. A shorter amortization raises the constant. A 6.0% loan on a 25 year schedule has a higher constant than a 6.5% loan on a 30 year schedule.
Sources
- Fannie Mae Multifamily Selling and Servicing Guide, Section 905.02 Underwritten DSCR
- Freddie Mac Multifamily, Optigo Conventional Small term sheet
This article is general information, not legal, tax or investment advice. Figures are illustrative; lenders set their own terms. DoorRaise is not a lender, law firm, broker-dealer, investment adviser or funding portal.