Does the Rent Cover the Mortgage Payment?
INGAR · · Investment
The back-of-the-envelope math looks like this: the apartment yields 5%, the loan costs 3.75%, and the difference is yours to keep. The problem is that those two percentages are measured against amounts that don't move together.
We ran the full numbers on a loan of 1,000,000 UI (Unidad Indexada, Uruguay's inflation-indexed unit of account) using the medians from our index. Net rent comes to $26,962 in pesos per month. The payment, with the Fondo de Protección del Inmueble (FPI, a mandatory property-protection fund fee) included, comes to $35,831.
For the rent to cover it on its own, the unit would need to yield close to 8.0% gross — the median of the published neighborhood medians for apartments is 6.0% — or you would have to put 40% down instead of 20%.
A property can be a good investment and a bad debt at the same time.
Can you compare a dollar yield with a UI interest rate?
Rent can be adjusted once a year; the UI changes every day.
The entry and exit price is usually thought of in dollars. That's where you measure how much capital went in and how much would come back on a sale.
The rent is usually collected in pesos. Demand in that particular area sets it. The owner may have paid far more for the unit, but that doesn't obligate the tenant.
The UI-denominated debt tracks inflation. As the INE explains (Uruguay's national statistics institute), the UI's value changes daily until it accumulates the prior month's change in the IPC (Uruguay's consumer price index). A payment that is fixed in UI keeps changing in peso terms.
Then there are the borrower's earnings. Those are in pesos too, but they follow neither the UI nor the rent.
These four figures can move in different directions. The asset can hold its value and still leave the owner without the cash to make the payment.
What a 1,000,000 UI loan really costs
Take a 1,000,000 UI loan over 25 years, with a TEA (effective annual rate) of 3.75% and level monthly payments in UI. That is a published rate for home purchases. Anyone looking to buy strictly as a rental needs to confirm the permitted use, the rate, and the loan-to-value percentage in their preapproval.
The pure principal-and-interest payment would be roughly 5,107 UI. The math uses the monthly rate equivalent to the TEA. Dividing 3.75% by twelve would give 5,141 UI, but that would treat an effective annual rate as if it were a nominal one.
That still leaves out the Fondo de Protección del Inmueble. BHU (Banco Hipotecario del Uruguay, the state mortgage bank) calculates it on the original principal:
1,000,000 × 0.35 ÷ 1,200 = 291.67 UI per month.
The initial debt service thus climbs from 5,107 to 5,399 UI per month. If the life-insurance premium is financed, its cost gets added to the principal and pushes up the FPI as well. According to the Podés Comprar specifications (BHU's home-purchase loan program), the policy from BSE (the state-owned insurance bank) is mandatory and can be paid at loan origination or financed when the transaction allows it.
If the UI rose 4% a year, that same payment would demand 21.7% more pesos in year five and 48.0% more in year ten. In UI it would still be 5,399. In pesos, it wouldn't.
The other number that matters shows up when you start thinking about selling. After five years and 60 payments, roughly 866,000 UI of principal would still be outstanding in this simplified example. The sale price would have to be enough to pay off that balance, cover the exit costs, and return the capital you put in.
The 4% is an assumption chosen to show the mechanics. If rent and income tracked the UI exactly, the relative effort would hold steady. The useful test begins when one of them falls behind.
How much equity do you need, and how much is missing each month?
On August 29, 2026, the UI was worth $6.6368 and BROU (Banco de la República, Uruguay's state-owned commercial bank) quoted the dollar at $39.05 buying and $41.55 selling. On that date, 1,000,000 UI came to about USD 159,730. To round out the exercise, assume that finances 80% of a property worth roughly USD 199,660.
The down payment would be close to USD 39,930. Purchase costs come on top of that: the INGAR calculator estimates a band of 10% to 13% when a mortgage is involved. Total cash at the start would land between USD 59,900 and USD 65,900, not counting any reserve for afterward.
Now let's use our own data instead of inventing a round rent figure. In July 2026, the INGAR Index showed a median gross yield of 6.0% and an estimated 3.9% net for apartments in the published neighborhoods. Applied to this property, that's about USD 998 gross and USD 649 net per month. At that date's selling rate for the dollar, the net figure equals roughly $26,962.
To keep a single exchange rate throughout the exercise, we converted back to pesos at the selling rate. It's an approximation: the Index's yield is itself built from peso rents converted to dollars. At the buying rate, the net would be about $25,340 and the shortfall would rise to $10,491.
The full debt service of 5,399 UI came to $35,831. The initial gap between rent and payment was $8,869.
In Pocitos, the July reading showed 5.1% gross and an estimated 3.3% net. On the same normalized price, net rent would run about $22,814 a month and the gap would widen to $13,017.
Nor does this comparison entitle you to subtract 3.75% from 3.9%. The yield is calculated on a dollar price; the debt is indexed in UI and carries the FPI on top. The useful takeaway is a different one: at current medians, the rent does not cover the loan service in this example.
Annual debt service comes to about USD 10,348. On a USD 199,660 property, it takes a 5.2% net yield to cover it. Applying the 35.16% deduction the Index uses to estimate the step from gross to net, the threshold sits near 8.0% gross.
Yields like that do exist in some segments, though not in the apartment medians for Pocitos, Buceo, Centro, or Cordón. Reviewing all 104 segments, we found a clear split: 45 met or exceeded 8.0% gross, but only 8 were apartment segments and 37 were houses. For this example, shopping only for apartments rules out most of the segments that clear the threshold. Vacancy, maintenance, liquidity, and sample quality vary across them, too.
The other way to balance the equation is to borrow less. At a 3.9% net yield, the largest loan that rent could cover runs around 752,500 UI, close to 60% of the price. The down payment would climb to about USD 79,500; with purchase costs added, you would need roughly USD 99,500 to USD 105,500 before signing.
What you still owe after five years
For the exit scenario, let's use a round UI value of $8: a 20.5% increase over five years, a bit under 4% a year. After 60 payments, 866,174 UI would remain, equal to $6,929,392.
The exchange rate decides how heavy that balance feels when you sell:
| Dollar buying rate in year five | Debt expressed in dollars | Left over from a USD 190,000 net sale |
|---|---|---|
| $40 | USD 173,235 | USD 16,765 |
| $48 | USD 144,362 | USD 45,638 |
| $56 | USD 123,739 | USD 66,261 |
The $40 scenario deserves attention. The dollar would have stayed almost at today's level while the UI climbed to $8. After a USD 190,000 net sale, USD 16,765 would remain — against an initial outlay of at least USD 59,900. Under those assumptions, the deal ends in a loss even before adding up the monthly shortfalls.
At $48 to the dollar, the leftover improves to USD 45,638, though it still falls short of the total initial capital, and the negative cash flow would have to be added on top. Only at $56 does the residual value clear the low end of the initial outlay; the final result would still hinge on rents, taxes, and the cash contributed over those five years.
Exit prices and future exchange rates are scenarios, nothing more. The UI, dollar, and Index figures used as the starting point are dated so the math can be rerun.
How to convert UI, pesos, and dollars without crossing your wires
First, pick a date and a unit for measuring the result. If you choose dollars, the conversion works like this:
- Rent: take the peso income and subtract taxes and costs.
- Payment: multiply the UI amount by that day's UI value. Since rent and payment are now both in pesos, you can compare the difference without going through the dollar.
- Monthly cash flow: if the difference is positive and you want to save in dollars, divide by the institution's selling rate. If it's negative and you cover it by selling dollars, use its buying rate.
- Exit: multiply the outstanding UI by the UI value and convert to dollars at the rate you would actually receive for your pesos. From the sale price, subtract expenses, taxes, and debt. Compare what's left with the capital contributed and the earlier cash flows.
The buying rate and the selling rate are not the same. On August 29, 2026, BROU published $39.05 and $41.55: a 6.4% gap measured against the buying rate. In a tight deal, that spread matters.
A UI rate is a real rate: beyond the interest, the principal is adjusted for inflation. A yield computed on a dollar price can't be compared with it without assuming what the dollar will do against Uruguayan prices over the same stretch.
What comes out of the rent before you compare it with the payment
Published yields are usually gross. The TEA covers the loan's interest, but it doesn't capture every cost of the financing or of the purchase itself.
From the rent, subtract vacancy, missed payments, property management, maintenance, repairs, municipal taxes, insurance, and whatever expenses fall to the owner.
Income tax deserves a mention, too. For a resident individual, DGI (Uruguay's tax authority) reports a withholding of 10.5% of accrued income when a withholding agent is involved. The annual tax is determined by applying 12% to the computable income and factoring in deductions, withholdings, and any exemptions. The regime varies by taxpayer and transaction. In the example we used 10.5% because we assumed a withholding agent and no exemption.
INGAR's guide to the real return on rental property walks through the path from gross to net income.
On the loan side, add insurance, fees, and origination costs. It also pays to separate interest from amortization: repaying principal reduces the debt, but it still demands cash every single month.
Then there's the purchase and sale themselves. The purchase-cost calculator helps estimate the cash needed upfront; a financed deal has to add its bank costs. On the way out come professional fees, mortgage cancellations, and the seller's ITP (Uruguay's property-transfer tax), which DGI sets at 2% of the updated official cadastral value. When IRPF or IRNR (Uruguay's personal and nonresident income taxes) is due on the capital gain, the computable income from the sale follows specific rules and exemptions; the tax doesn't simply apply to the entire sale price.
Does BHU finance 95% for a buy-to-rent purchase?
The 95% that Podés Comprar advertises is reached through the Fondo de Garantía de Créditos Hipotecarios (FGCH, a state-backed mortgage-guarantee fund). The regulations approved by Decreto 95/012 require the property to serve as the borrower's own home. The FGCH rules at ANV (Uruguay's national housing agency) add a sole-residence requirement: in general, applicants may not own, hold purchase commitments on, or hold rights to another suitable home in Uruguay.
The FGCH was not designed to finance a purchase intended purely as a rental. That's why the 95% shouldn't be carried over into this investment example.
This separates two situations that often get blended together. BHU's ES.CRE.03 specification says it plainly: "Applicants may own other properties; this is no impediment to applying for a loan." That possibility does not unlock the FGCH's 95%. The financeable percentage will depend on the product, the borrower's profile, the property, and the specific approval.
The Préstamo Soñado program advertises up to 100%, a TEA starting at 4.50%, and an additional mortgage on another property during the first years. Having to pledge extra collateral changes the risk considerably.
"From 3.75%" describes the interest on a UI-denominated debt. The peso payment will follow the UI's daily value.
The terms in this article were verified on August 29, 2026. They're useful for studying the mechanics; the quote that counts is the one issued to each applicant for the declared purpose of the purchase.
Financing a large share shrinks the initial outlay but leaves less cushion for a repair, a vacancy, or an early sale. Our guide to hidden costs when buying with a loan goes deeper on those expenses; the comparison of mortgage banks in Uruguay rounds up the products currently on offer.
How to estimate the rent for a specific unit
In June 2026, INE's technical table reported an average rent of $22,245 and 149,789 active leases; the count fell 0.58% from May. The methodological note puts estimated market coverage at 55.4%, based on additions made in the first half of 2025. It also warns that active leases can be several years old. The IAI's standing report page (INE's real-estate activity indicators) is useful for tracking the broad trend. The likely price of a specific unit is found much closer to the ground.
Projecting rent takes recent, comparable listings from the same micro-area, with similar size, condition, and building fees. The INGAR Index publishes prices, rents, and estimated gross and net yields by neighborhood, clearly flagged as listing data. Start with Pocitos, Cordón, or Buceo, then swap the median for the actual numbers of the unit in question.
INE's general report runs through June. The neighborhood pages show the latest territorial breakdown available, which as of August 29 was May 2026; that's why Cordón explains the lag on its own page.
What to test before you sign
1. That it works without appreciation
Use the documented price, rent, and rate. Include every expense and assume the property's real value doesn't rise during the first years. If the math needs future appreciation to work, that should be out in the open.
2. That it survives lagging income
Even if the rent carries a price-linked adjustment, it may move in annual jumps while the UI moves every day. Wages can fall behind, too. The test is to let the UI outgrow both the rent and your personal income for two or three years and measure how much cash is missing each month.
As of August 2026, BHU's loan FAQ sets a general cap of 25% of disposable income for employees, retirees, and independent professionals, which can rise to 30% when the payment is withheld from wages; for "other income" they publish 20%. The Podés Comprar specification notes that, depending on the profile, the cap can reach 35%. On top of that, the client cannot end up taking home less than 50% of their legal net pay in cash.
With the example's initial payment of $35,831, the required disposable income would be:
| Cap applied by the bank | Monthly disposable income |
|---|---|
| 20% | $179,153 |
| 25% | $143,322 |
| 30% | $119,435 |
| 35% | $102,373 |
The limit depends on the profile and on the approval. If the stressed payment exceeds that share of income, the debt can become hard to sustain, even if it qualified at the start.
Does BHU count the unit's future rent as income? The official specification accepts already documented rental income backed by a lease, an accountant's certification, and payments to DGI. It does not say the projected rent from the very property being purchased will count. Until you have a written answer in the preapproval, assume the payment has to be carried by existing, provable income.
3. That an imperfect exit exists
Add vacancy, a major repair, and a sale with no improvement in the dollar price. From the sale value, subtract the costs and the debt balance outstanding on that date.
In this test, it's also worth writing down how many months of payments and expenses you could carry with no rent coming in.
Ten numbers that should fit on a single page
- Total price and the currency of every payment.
- Your own capital, upfront costs, and the post-purchase reserve.
- Rate, term, insurance, fees, and how the debt is indexed.
- Initial payment in UI and in pesos.
- Gross and net rent, with dated comparables.
- How many months of payments and expenses you can carry without a tenant.
- Estimated debt balance at three, five, and ten years.
- Assumed UI value and effective exchange rate in each scenario.
- Payment-to-income ratio, initial and stressed, with the cap that applies to your profile.
- The result of selling at those horizons with no dollar appreciation.
Frequently asked questions
Is it wise to borrow in UI if I earn in pesos?
It can be sustainable if your income leaves room and you keep a reserve. In the example, 5,399 UI was $35,831 on August 29, 2026; at a 25% cap, that required about $143,322 of disposable income.
Does a gross yield above the TEA mean there's a profit?
No. In July 2026, the INGAR Index went from 6.0% gross to an estimated 3.9% net for Montevideo apartments. And the 3.75% TEA applies to a UI balance, while the debt service adds 291.67 UI a month of FPI for every million borrowed.
Which currency should the result be measured in?
It depends on the goal, but every component must be compared in the same unit. For monthly cash flow, pesos or UI work; to preserve capital and evaluate a sale, many investors also look at the result in dollars.
How do I convert a UI balance to dollars?
Multiply the UI balance by the UI value, then divide by the effective dollar rate. For example: 866,174 UI × $8 ÷ $40 = about USD 173,235.
Which number best reveals the risk of an early sale?
The debt balance on the likely exit date. In this case, close to 866,174 UI remained after five years — about 86.6% of the original principal.
Can I use the FGCH's 95% if I already own a home?
Not for a purchase intended purely as a rental. The regulations require the property to be the beneficiary's own home, and ANV requires it to be their only one, with the exceptions the rules provide. BHU may consider a different loan for someone who already owns property, but that 95% benefit doesn't carry over automatically.
This content is informational only. It is not financial, tax, or legal advice. Rates and terms change; any actual transaction requires a current quote and professional review.