Mortgage Constant
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The mortgage constant (also called the loan constant) expresses total annual debt service — both principal and interest — as a percentage of the original loan amount, capturing the effect of the amortization term, not just the rate. Two loans at the same interest rate but different amortization periods will have different mortgage constants.

It's commonly compared to a property's cap rate to quickly assess leverage: if the cap rate exceeds the mortgage constant, borrowing tends to boost your cash-on-cash return (positive leverage); if the mortgage constant exceeds the cap rate, borrowing tends to hurt your return (negative leverage).

A shorter amortization period requires paying off the same principal faster, which increases the required annual payment relative to the loan amount, raising the mortgage constant even though the interest rate itself hasn't changed. Longer amortization periods lower the mortgage constant by spreading principal repayment over more years.

Generally, a lower mortgage constant means lower required annual debt service relative to the loan, which increases the odds of positive leverage against a given cap rate — but it usually comes from either a lower rate or longer amortization, and longer amortization means slower equity buildup through principal paydown.

On a true interest-only loan, the mortgage constant equals the interest rate exactly, since the annual payment is 100% interest and 0% principal. Once a loan starts amortizing (paying down principal), the mortgage constant becomes higher than the stated interest rate.