What is a 'Mortgage Constant'

A ratio between the annual amount of debt servicing to the total value of the loan. The mortgage constant is only applicable to mortgages that pay a fixed rate.

Also known as the "mortgage capitalization rate".

BREAKING DOWN 'Mortgage Constant'

This constant also can be used to calculate the highest loan value that could be received on a property given the income generated by that property, if it is a commercial or rental property. For example, if the total amount paid annually on a $200,000 loan is $5,000, the mortgage constant would be 5,000 / 200,000 = .025, or 2.5%.

RELATED TERMS
  1. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  2. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
  3. Home Mortgage

    A home mortgage is a loan given by a bank, mortgage company or ...
  4. Satisfaction of Mortgage

    A document generated and signed by a mortgage lender, acknowledging ...
  5. Junior Mortgage

    A mortgage that is subordinate to a first or prior (senior) mortgage. ...
  6. Mortgage Banker

    A company, individual or institution that originates mortgages. ...
Related Articles
  1. Personal Finance

    Finding the Best Mortgage Rates in 2017

    As home-buying technology has progressed, the process of finding the best mortgages rates can all be done online. Here's how:
  2. Personal Finance

    Mortgage Company

    A company engaged in the business of originating and/or funding mortgages for residential or commercial property.
  3. Personal Finance

    Reduce Interest With An All-In-One Mortgage

    "Offset" mortgages combine a checking account, home-equity loan and mortgage into one account.
  4. Personal Finance

    Should I Consolidate My Two Mortgages?

    Consolidating your loans or mortgage may make sense for you, especially when interest rates are low. Here's what you should know.
  5. Retirement

    The Reverse Mortgage: A Retirement Tool

    Discover another way to fund your retirement without having to make payments on a loan.
  6. Investing

    Homebuyers Bracing for Higher Interest Rates

    Mortgage applications rose by 5.5%, as homeowners brace for rising inflation and interest rates.
  7. Investing

    Financing Basics For First-time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  8. Investing

    Who is Ruling the Jumbo Mortgage Market?

    The jumbo mortgage market appears to be booming this year, despite the few economic hurdles everyone's battling. Here's who is ruling the industry.
Trading Center