Mortgage insurance is a crucial financial safeguard for homeowners in Singapore. However, its necessity depends on the type of home loan and property you purchase. This guide explains what mortgage insurance is, when it is mandatory, and how it works.
1. What is Mortgage Insurance?
Mortgage insurance is a policy that ensures the outstanding home loan is repaid in case of the borrower’s death, total permanent disability (TPD), or terminal illness. This prevents surviving family members from being burdened with mortgage repayments should an unfortunate event occur.
2. Is Mortgage Insurance Compulsory in Singapore?
The requirement for mortgage insurance depends on the type of loan and property:
(A) HDB Home Loan / HDB Bank Loan – Compulsory Under Home Protection Scheme (HPS)
- If you use CPF to pay your HDB home loan, you must be covered under the Home Protection Scheme (HPS).
- HPS is a mortgage-reducing insurance scheme administered by CPF Board to ensure the mortgage is fully or partially paid off in the event of death, terminal illness, or TPD.
- If you are not using CPF for loan repayment, HPS is not required.
- You can apply for an HPS exemption if you have a private insurance policy that offers equivalent coverage.
(B) Private Property Bank Loan – Not Compulsory but Recommended
- Mortgage insurance is not legally required for bank loans used to purchase private properties.
- However, it is strongly recommended as a financial safeguard to prevent undue hardship in case of unexpected events.
3. Types of Mortgage Insurance in Singapore
A) Home Protection Scheme (HPS)
- Coverage: Outstanding HDB loan in case of death, terminal illness, or TPD.
- Premiums: Paid annually until age 65 or until the loan is fully repaid.
- Coverage Reduces Over Time: As the loan balance decreases, the coverage amount also reduces.
B) Mortgage Reducing Term Assurance (MRTA)
- Coverage: Home loan repayment in case of death, TPD, or terminal illness.
- Features:
- Premiums are paid upfront or over a fixed period.
- Sum assured decreases as the loan balance reduces.
- Suitable for homeowners with dependents who may struggle with repayments.
C) Level Term Insurance (LTA) – Alternative to MRTA
- Coverage: A fixed sum payout, regardless of the loan balance.
- More expensive than MRTA but allows beneficiaries to use excess funds for other financial needs.
- Often chosen for long-term financial planning beyond just mortgage repayment.
4. How Mortgage Insurance Works
- Borrowers using CPF for HDB loan payments are automatically covered by Home Protection Scheme (HPS), unless they qualify for an exemption.
- If the borrower passes away or becomes permanently disabled, the insurance pays off the outstanding loan balance, preventing financial strain on the family.
- For private property owners with bank loans, those who purchase Mortgage Reducing Term Assurance (MRTA) or Level Term Insurance (LTA) will have their mortgage covered under similar conditions.
5. Cost of Mortgage Insurance in Singapore
Premiums vary based on:
✔ Loan amount
✔ Loan tenure
✔ Age of borrower
✔ Health conditions
✔ Smoking status
- Mortgage Reducing Term Assurance (MRTA) premiums are typically lower than Level Term Insurance (LTA) premiums as the sum assured remains fixed.
6. Should You Get Mortgage Insurance?
While mortgage insurance is compulsory for HDB loans/HDB Bank loans (if using CPF), it remains a strongly recommended protection for private property bank loans.
Key considerations:
✅ Do you have dependents relying on your income?
✅ Can your family afford the mortgage if something happens to you?
✅ Would a life insurance policy provide sufficient coverage instead?
Conclusion
Mortgage insurance is mandatory for HDB loans/HDB Bank loans (if CPF is used) under the Home Protection Scheme but optional for private property bank loans. However, homeowners should still consider mortgage insurance as an essential financial safeguard to protect their families from unforeseen financial burdens. If you have a private property bank loan, exploring Mortgage Reducing Term Assurance (MRTA) or Level Term Insurance (LTA) can provide additional security.
Would you like to speak with our mortgage brokers for assistance in finding the best home loan rates and the most suitable mortgage insurance policy? 😊