Mortgage Insurance Singapore

Manage Your Mortgage Coverage

Most common people like you and me will usually take a housing/home loan from a financial institution (e.g. bank) because of the huge amount of money involve when purchasing a mortgage or property.

Therefore, the mortgage insurance or housing/home loan protection insurance covers the loan amount and protect against unexpected death, total and permanent disability and in some cases, covers for critical illness as well.

What Is Mortgage Insurance?

Mortgage insurance also commonly known as Mortgage Reducing Term Assurance (MRTA) or Decreasing/Reducing Term Insurance policies provides financial protection against outstanding capital of their mortgage loan in the event of pre-mature death, unexpected total and permanent disability and terminal illnesses.

The reason why it is also named as decreasing term insurance plan is because the sum assured (insured amount) reduces with the term of the policy. As the policy owner continues to pay for his/her mortgage loan, the outstanding capital of the mortgage loan, will decrease along with the term.

Therefore, because of the decrease in outstanding capital amount of mortgage loan, the sum assured of the mortgage insurance will also decrease according to the outstanding loan.

Why Is There A Need To Buy Mortgage Insurance?

Are you wondering, what are the benefits of purchasing a mortgage insurance?

There are a few very good reasons to get a mortgage insurance to protect against your outstanding home loan amount.

1. Family protection
2. Your property/mortgage is illiquid
3. Affordable premiums

Family Protection

When you purchase a property, you want to have the security, assurance and a roof above your family. While you are still paying for your mortgage loan, you might want to make sure that if unexpected event like pre-mature death, unexpected total and permanent disability or terminal illness happens, your surviving loved ones do not have to be stress or worry about the financial burden of paying off the outstanding loan.

Your Property/Mortgage Is Illiquid

When you purchase a property, either for investing or for self-staying, you should take a long term horizon to your property. In the short few years, most investor will not want to liquid the property as it might not get the best rate of return. Therefore, when unexpected events happen, if you do not have the capability or financial means to continue pay for the mortgage loan, you will be forced to liquid the property at the wrong time.

The wiser choice is to purchase a mortgage insurance so that a lump sum will be pay out. You have a choice of liquidating the property or paying off the property.

Affordable Premiums

Mortgage insurance is actually a kind of term insurance and the premiums is relatively affordable.

Comparing mortgage insurance with other types of insurance products, taking the insurance coverage and premiums, it is comparatively cheaper and affordable.

I Am Buying A HDB, Do I Need To Buy Mortgage Insurance?

In Singapore, when purchasing a Housing and Development Board (HDB) flats, it is compulsory to purchase a mortgage insurance called Home Protection Scheme (HPS).

The premium is paid via Central Provident Fund (CPF)’s Ordinary account.

However, because of the restrictions, some HDB owners still prefers to purchase the mortgage insurance with private insurers instead of HPS for the following reasons:

1. Private mortgage insurance will be able to waive off outstanding mortgage insurance premiums in the event of critical illnesses.
2. The lump sum payout is paid to the policy owner instead of the mortgage loan itself.
3. It is transferable to other property if the loan amount is the same.
4. Private mortgage insurance can be purchased as joint-life with your spouse.

However, the premiums for the private mortgage insurance is paid via their own pocket instead of CPF-OA account.

Do I Need To Buy Mortgage Insurance For My Private Property?

Technically, it is not mandatory for you to purchase a mortgage insurance for your private property. But most wise property owner will still wants to cover for their mortgage loan because:

1. For private property, the housing loan amount is usually higher than the HDB (subsidized) flats in Singapore.
2. Peace of mind and assurance to loved ones that if something unexpected happens, your family members do not have to be stressed and worry about financing the private mortgage loan.
3. A lump sum paid out to the surviving family members will allow loved ones to have an option of selling or keeping the property and not be financially burdened or forced to sell the property.
4. The mortgage insurance is transferable if you would want to sell and purchase another property.

With the above benefits and reasons, it is encouraged for property owners to purchase an affordable mortgage insurance so that you have assurance that the roof above your family is even more secured.

How Can I Cover For My Spouse In My Mortgage Insurance?

When you purchase your property together with your spouse, you would also like to cover him/her in your mortgage insurance. One of the features of the mortgage insurance allows you to purchase it as joint-life. A joint-life policy will allow a lump sum payout when either party meet with pre-mature death, unexpected disability or terminal illness.

For example, when both husband and wife, in name, purchase a property, they are each liable to pay for the outstanding capital of the housing loan together.

Therefore, when either party, unexpectedly pass away, the surviving person have to continue pay the outstanding loan.

When they both purchase a joint-life mortgage insurance, when either party unexpectedly passes away, the surviving person will inherit the proceeds from the mortgage insurance. The surviving person have a choice to choose whether to use the proceed from the policy to pay off the loan or for other purpose.

However, in the case of HDB, the proceeds from HPS, will pay off the mortgage loan directly.

How Do I Purchase The Mortgage Insurance?

Most of the insurers like NTUC, Great Eastern Life, Aviva and Prudential (just to name a few) does provide a comprehensive mortgage insurance policy.

They will usually require the following documents and decision to make a quotation:

1. Loans agreement with the financial institution (e.g. OCBC, DBS, UOB etc)
2. Identification documents of both spouse and yourself if you are purchasing as joint-life
3. Deciding whether to purchase it as joint-life or single life
4. Interest rates (usually between 4% – 8%)

The easiest way is to pass your loan agreement to your financial planner and he/she will be assist you with the following quotation.

About Financialogy

Financialogy is a website that educates the importance of coverage and protection in Singapore. When purchasing a large ticket item or asset like a property, it is essential that you understand the importance of mortgage insurance and how it can help to protect against financial burden to pay off your capital amount of your mortgage loan when unforeseen circumstances happen.

Therefore, we are on this mission to make sure that proper financial planning is carried out for you and you are well insured to make sure that your roof over your family is even more secured.

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