Rental Yield vs Mortgage: Cash Flow Analysis – Fast Answer
In Singapore, a safe rule of thumb is that an investment property is cash-flow healthy when your net rental yield (after costs) is higher than your effective mortgage interest cost, and the monthly rent comfortably covers instalments even after stress-testing for higher rates and short vacancies.
This cluster article dives deep into Rental Yield vs Mortgage: Cash Flow Analysis for Singapore investors and links back to Homejourney’s main Property Investment Financing Complete Guide Singapore Property Investment Financing Complete Guide Singapore | Homejourney . You will learn how to evaluate single-property and multiple property financing, and how to use Homejourney tools to build a resilient, long-term portfolio.
Key Concepts: Rental Yield, Mortgage, and Cash Flow in Singapore
If you are investing in a condo in areas like Punggol, Sengkang or Queenstown, your decision is less about “Can I get a loan?” and more about “Can this rent safely service my mortgage across cycles?”. That is the essence of rental yield vs mortgage cash flow.
1. Gross vs Net Rental Yield
Gross rental yield = Annual rent ÷ Property purchase price × 100%.
Official and market data put private residential gross rental yields in Singapore at around 3–3.5% on average, with some OCR locations such as Hougang / Punggol / Sengkang and Alexandra / Commonwealth slightly higher than the island-wide average.[1][6]
However, investors should focus on net rental yield, which deducts:
- Property tax (higher for investment units, especially after recent IRAS revisions)
- MCST fees and sinking fund for condos
- Agent leasing fees and minor repairs
- Insurance and occasional vacancy
For example, a two-bedder in Sengkang bought at S$1.1M and rented for S$3,800/month may show ~4.1% gross yield, but after costs the net yield may drop closer to 2.8–3.0%.
2. Mortgage Cost: Interest Rate, Tenure, and Structure
Your key mortgage variables are:
- Interest benchmark: mainly 1M or 3M SORA plus a bank spread, or a short-term fixed rate period.[1]
- Bank spread: usually up to ~1% above SORA for home loans in 2025–2026.[1]
- Tenure: up to 30 years for private properties; MAS caps based on age and property type.
- Type: Fixed vs floating packages from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, CIMB, RHB, Public Bank, Hong Leong Bank, Citibank.
Recent market packages have seen best fixed rates around 1.35–2.4% for the lock-in period and competitive floating packages based on 1M/3M SORA plus a small spread.[1][4]
On Homejourney, you can compare these options in one place via our bank rates page Bank Rates , then use the integrated mortgage calculator Mortgage Rates to project monthly instalments.
3. Interest Rates and SORA: Why They Matter for Cash Flow
Most investment loans today are either directly pegged to SORA or revert to SORA after an initial fixed period. Lower SORA reduces your monthly instalment and improves cash flow; higher SORA does the opposite.
The chart below shows recent interest rate trends in Singapore:
Homejourney tracks live 3M and 6M SORA on our rates tools so you can time your refinancing or new purchase more confidently and avoid over-stretching when rates are high.
Step-by-Step: Cash Flow Analysis for a Single Investment Property
To keep things practical, let’s walk through a realistic example in an area many investors know well: PunggolPunggol MRT (Exit A) to some of the waterfront condos near Waterway Point – it’s about a 7–10 minute stroll depending on which block you’re viewing – and many tenants pay a small premium just to be within this walking distance.
Step 1: Estimate Realistic Rent
Assume you buy a 2-bedroom unit near Punggol MRT at S$1.1M. Based on URA transaction data and current leases for similar OCR projects, realistic asking rents in 2025–2026 have been in the S$3,600–S$3,900 range for a modern two-bedder in good condition.[1]
Let’s use S$3,800/month (S$45,600/year) as a base case.
Step 2: Calculate Gross and Net Yield
Gross yield = 45,600 ÷ 1,100,000 ≈ 4.15%.
Now deduct yearly expenses (illustrative figures):
- MCST + sinking fund: S$300/month → S$3,600/year
- Property tax (non-owner-occupied, mid-range): ~S$4,000/year
- Maintenance/repairs allowance: S$1,200/year
- Vacancy allowance (1 month/year): S$3,800/year
Total annual costs ≈ S$12,600. Net rent = 45,600 – 12,600 = S$33,000.
Net yield = 33,000 ÷ 1,100,000 ≈ 3.0%.
Step 3: Compare Against Your Mortgage Cost
Suppose you pay 25% down (S$275,000) plus stamp duties and buy with a 75% bank loan of S$825,000 at 2.0% interest over 25 years. Monthly instalment is roughly S$3,500–S$3,550 (you can get exact numbers with Homejourney’s mortgage calculator Mortgage Rates ).
- Net monthly rent after expenses and vacancy = 33,000 ÷ 12 ≈ S$2,750
- Monthly instalment ≈ S$3,525
You are approximately –S$775/month cash flow negative before accounting for CPF usage, but part of that instalment is principal repayment (forced savings).
If interest rates drop to 1.6% and you refinance, the instalment may fall by a few hundred dollars. Homejourney’s refinancing comparison on the bank rates page Bank Rates lets you simulate this scenario with real-time bank packages.
Step 4: Stress-Test for Rate Hikes and Lower Rent
A responsible cash flow analysis must stress-test:
- Interest rate shock: What if your effective rate rises to 3.5–4.0%?
- Rent decline: What if rent drops by 10–15% or vacancy stretches to 2–3 months?
For instance, if rent dips to S$3,400/month and your rate jumps to 3.5%, your monthly shortfall could exceed S$1,000. You should only proceed if your income and CPF OA can comfortably cover this gap under MAS’s TDSR rules (currently 55% of gross monthly income) and HDB’s MSR where relevant.
Homejourney’s eligibility calculator Mortgage Rates automatically factors in TDSR/MSR assumptions so you avoid over-leverage.
