Debt Constant Chart: Annual Loan Cost by Rate and Term
A debt constant chart and mortgage constant table for 15 to 30 year loans at 4% to 8%, plus how to read the annual loan cost against a 5.78% cap rate.
By the CapRateCalculator.co team
A debt constant chart shows the annual cost of a loan as a percentage of the balance. Also called a mortgage constant table, it answers one question: for a given interest rate and term, what share of the loan leaves your account each year in principal and interest? The chart below runs from 4% to 8% over 15, 20, 25 and 30 years. The sections after it show how to read those numbers against a cap rate.
What a debt constant is, and the formula behind the chart
The debt constant is annual debt service divided by the loan balance. Take one month of principal and interest, multiply by 12, then divide by the amount borrowed. The definition itself, and how the number feeds the band-of-investment method, sit on the mortgage constant page.
Every cell in the chart comes from one formula:
constant = 12 x i / (1 - (1 + i)^-n)
Here i is the monthly rate, which is the annual rate divided by 12, and n is the number of monthly payments. A 30-year loan has 360 of them.
Two things about this number matter before you use the chart. On an amortizing loan the constant always sits above the interest rate, because principal is part of every payment. And loan size never changes it. The same rate and term produce the same constant on a $100,000 loan and on a $1,000,000 one, which is the reason a chart like this works at all.
Debt constant chart: annual loan cost by interest rate and term
Each figure is annual principal and interest as a percentage of the starting loan balance, for a fully amortizing fixed rate loan.
| Rate | 15 years | 20 years | 25 years | 30 years |
|---|---|---|---|---|
| 4.0% | 8.88% | 7.27% | 6.33% | 5.73% |
| 4.5% | 9.18% | 7.59% | 6.67% | 6.08% |
| 5.0% | 9.49% | 7.92% | 7.02% | 6.44% |
| 5.5% | 9.80% | 8.25% | 7.37% | 6.81% |
| 6.0% | 10.13% | 8.60% | 7.73% | 7.19% |
| 6.5% | 10.45% | 8.95% | 8.10% | 7.58% |
| 7.0% | 10.79% | 9.30% | 8.48% | 7.98% |
| 7.5% | 11.12% | 9.67% | 8.87% | 8.39% |
| 8.0% | 11.47% | 10.04% | 9.26% | 8.81% |
To use a row, multiply the constant by your loan balance. A $375,000 loan at 6.5% over 30 years has a 7.58% constant, so annual debt service is about $28,400.
Read down a column and you see the rate effect: four points of extra interest, from 4% to 8%, adds about three points to a 30-year constant. Read across a row and you see the term effect, which is larger than most buyers expect. At 6%, going from 30 years to 15 years moves the constant from 7.19% to 10.13% with no change in the rate at all.
Interest-only loans
An interest-only loan has a constant equal to its interest rate. At 6.5% the constant is 6.5%, full stop, because no principal is due. Treat that as the floor. Everything above it in the chart is the price of paying the loan down.
How to read the chart against a cap rate: the $500,000 example at 5.78%
Take the standard example on this site. A $500,000 house rents for $4,000 a month with 5% vacancy, $6,000 of taxes, $2,500 of insurance, and 18% of collected income for maintenance, reserves and management. That leaves NOI of $28,892 and a cap rate of 5.78%.
Buy it with 25% down and you have a $375,000 loan against $125,000 of cash.
At 5% over 30 years, the constant is 6.44%. Debt service is 6.44% of $375,000, or $24,158 a year. NOI covers it with $4,734 left over, and the debt service coverage ratio is 1.20. The loan clears. But the cap rate of 5.78% is below the 6.44% constant, so the borrowed money costs more than it earns. Return on the $125,000 down payment works out near 3.8%, below the cap rate. That is negative leverage.
At 7.25% over 30 years, the constant is about 8.19%. Debt service becomes $30,704, which is more than the $28,892 of NOI. Cash flow is negative $1,812 and DSCR falls to 0.94. Most lenders want 1.20 or better, so that version of the deal does not get financed at 25% down.
The simple tab works the same way. $30,000 of NOI on $500,000 is a 6% cap rate, and you compare that 6% to the constant in the chart.
Where the debt constant and the cap rate cross over
The crossover is the interest rate where the constant equals the cap rate. Below that rate, borrowing adds to your return. Above it, borrowing subtracts.
For the 5.78% example on a 30-year loan, the crossover sits a little above 4%. The 4% constant is 5.73%, just under the cap rate. At 4.5% it is 6.08%, already above. So that property earns positive leverage only around 4% or lower on a 30-year amortizing loan. On the 6% simple tab figure, the crossover is near 4.4%.
Price is the other lever. Holding NOI at $28,892, clearing an 8.19% constant means paying about $352,800 rather than $500,000. Rent growth moves the same line, just slowly, which is one reason buyers accept thin spreads. More on that in the guide on cap rates and interest rates.
One caution on the term columns. A 15-year loan looks terrible on this test, because its constant runs two to three points above a 30-year loan at the same rate. The extra is principal, not cost. It leaves your checking account and lands in your equity. The crossover test measures cash flow timing, not whether the purchase builds wealth.
Run your own numbers
The chart gives you the debt side. For the income side, put your purchase price, rent and expenses into Cap Rate Calculator on the home page and compare the cap rate it returns against the constant for your rate and term.
Frequently asked questions
What is a debt constant?
A debt constant is one year of principal and interest divided by the loan balance, shown as a percentage. It tells you what share of the borrowed money leaves your account each year. On an amortizing loan it always sits above the interest rate, because principal is part of the payment. Loan size never changes it. Only the rate, term and amortization do.
How do you read a mortgage constant table?
Find your interest rate in the left column, read across to your term, then multiply that percentage by the loan balance. A $375,000 loan at 6.5% over 30 years shows a 7.58% constant, so annual principal and interest is about $28,400. Compare that figure to the property's net operating income to see whether the income covers the debt.
What is the debt constant on a 30-year loan at 7%?
About 7.98%, so close to 8%, on a fully amortizing fixed rate loan. Over 25 years the same 7% rate gives about 8.48%, over 20 years about 9.30%, and over 15 years about 10.79%. The shorter the term, the more principal you pay each year, so the constant climbs while the interest rate stays put.
Should the cap rate be higher than the debt constant?
For borrowing to help your return, yes. When the cap rate sits above the constant, each borrowed dollar earns more than it costs, and the return on your cash beats the cap rate. Below it, the loan drags the return down. A 5.78% cap rate against a 6.44% constant still cash flows, but the equity return lands under 4%.