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Mortgage Constant


The mortgage constant formula (or loan constant formula) is used for the estimation of themortgage loan payment that the borrower will be required to pay over a given period. The main inputs in the mortgage constant calculation are the mortgage rate and the loan term. See here summary of the latest mortgage rate forecast.

The term morgage actually is exclusive to the property industry, as it refers to a loan that uses property as collateral. The main sources of property loans are conventional or non-conventional mortgage lenders and brokers. The most important factors in the mortgage constant formula are the mortgage rate and the term of the loan. This formula actually calculates the periodic (monthly, quarterly, or annual) cost (including principal and interest payments) of financing as percent of total loan amount.

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1 Comment

  1. […] of borrowing or the effective interest rate. Wurtzebach and Miles (1994) suggest the use of the mortgage constant as opposed to the interest rate in assessing whether borrowing will result in positive leverage. […]

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