How Much Mortgage Insurance Coverage Do You Need: Homejourney Guide

How Much Mortgage Insurance Coverage Do You Need in Singapore

The amount of mortgage insurance coverage you need depends on your outstanding loan balance, your income proportion, and your family's financial obligations. Most Singapore homeowners should aim to cover at least 100% of their outstanding mortgage loan, though some situations may require different coverage levels. Understanding the right coverage amount is critical not only for protecting your family but also for improving your mortgage approval chances with banks.

At Homejourney, we believe that transparent financial guidance builds the trust necessary for confident property decisions. This guide walks you through calculating your ideal mortgage insurance coverage, understanding how insurers assess your needs, and optimizing your application to increase approval chances with Singapore's major banks.

Understanding Mortgage Insurance Coverage in Singapore

Mortgage insurance in Singapore serves a specific purpose: it protects your family by covering your outstanding housing loan in the event of death, terminal illness, or total and permanent disability (TPD).[1] This is fundamentally different from fire insurance or home content insurance, which protect the property itself rather than the loan obligation.

Singapore offers three primary mortgage insurance options: the mandatory Home Protection Scheme (HPS) for HDB buyers using CPF, Mortgage Reducing Term Assurance (MRTA) for HDB buyers not using CPF, and private mortgage insurance for private property owners.[1] Each has different coverage structures, premium calculations, and approval criteria that directly impact your borrowing capacity.

Coverage Amount Calculation: The Core Framework

Your mortgage insurance coverage should reflect the proportion of the monthly housing instalment you personally pay.[2] If you're the sole borrower paying 100% of the monthly mortgage, you need 100% coverage. If you and your spouse jointly own the property with a 70-30 income split, you should maintain 70% coverage on your portion and your spouse should have 30% coverage on theirs.[2]

Here's the practical calculation framework:

1. Determine your outstanding loan balance: This decreases monthly as you make repayments. For HPS and MRTA, coverage automatically reduces with your loan balance, so your premium decreases over time.
2. Calculate your income proportion: If you earn S$6,000 monthly and your spouse earns S$4,000, you represent 60% of household income. You should maintain at least 60% coverage of the total loan amount.
3. Account for dependents: If you have children or elderly parents relying on your income, consider coverage that extends beyond just the mortgage—up to 9 times your annual income is the industry-recommended benchmark for total protection needs.[7]
4. Review your CPF balance: If using CPF to service your HDB loan, ensure your CPF Ordinary Account has sufficient balance to cover the insurance premiums, which are automatically deducted.

HPS vs. MRTA vs. Private Mortgage Insurance: Coverage Differences

Each mortgage insurance type has distinct coverage structures that affect both your protection level and approval chances:

Home Protection Scheme (HPS) for HDB Buyers Using CPF: HPS is mandatory if you're using CPF Ordinary Account savings to pay your HDB mortgage.[1] Coverage is decreasing term insurance—the sum assured reduces as your loan balance shrinks. Premiums are automatically deducted from your CPF-OA, and coverage extends until age 65 or loan maturity, whichever comes first.[1] The advantage is simplicity and automatic premium adjustment; the disadvantage is that you cannot port the coverage to a new property—you must reapply if you upgrade.[2]

MRTA for HDB Buyers Using Cash/Bank Loans: If you're not using CPF to service your HDB mortgage, MRTA provides similar decreasing-term coverage but through a private insurer. This option offers more flexibility in coverage amounts and is portable if you refinance or upgrade properties.[1]

Private Mortgage Insurance for Private Property Owners: Private property buyers can only access private mortgage insurance from banks. Coverage can be structured as decreasing term (reducing with loan balance) or level term (fixed amount throughout). Premiums are typically higher than HPS but offer portability and continued coverage beyond age 65 if needed.[3] Banks like OCBC offer group mortgage insurance with no medical underwriting for mortgages up to S$1.25 million, making approval easier for standard cases.[3]

How Coverage Amount Impacts Mortgage Approval Chances

Banks assess your mortgage insurance coverage as a risk mitigation factor. Adequate coverage demonstrates financial responsibility and reduces the lender's risk exposure. Here's how coverage affects your approval:

1. Loan-to-Value (LTV) Ratio Consideration: As of 2025, the Monetary Authority of Singapore caps LTV at 75% for first-time bank housing loans and 80% for HDB concessionary loans via CPF.[1] The remaining 25% downpayment must come from your own resources. Banks view mortgage insurance as proof that you've planned for contingencies, which strengthens your overall application profile.
2. Debt Service Ratio Assessment: Banks examine your total monthly debt obligations against your income. If you're carrying other debts (credit cards, car loans, personal loans), adequate mortgage insurance shows you understand the importance of loan protection, which can positively influence approval decisions.
3. Age and Health Underwriting: For HPS applicants, health conditions may result in coverage exclusions or outright rejection.[2] If you're denied HPS, you can apply for private mortgage insurance which may accept pre-existing conditions with exclusions, but this requires disclosure during the mortgage application process. Banks prefer applicants with full HPS approval over those with restricted private coverage.
4. Joint Applicant Coverage: If applying jointly with a spouse, both parties must have adequate individual coverage for their income proportion.[2] Banks view this as lower risk because the loan remains protected regardless of which spouse experiences an insurable event.

Step-by-Step: Calculating Your Ideal Coverage Amount

Step 1: Determine Your Loan Amount and Outstanding Balance

Start with your total mortgage loan amount. If you're applying for a new mortgage, this is straightforward. If refinancing or upgrading, use your current outstanding balance. For example, if you borrowed S$500,000 for a 30-year HDB mortgage and are currently 5 years into repayment, your outstanding balance is approximately S$470,000.

Step 2: Identify Your Income Proportion

If applying alone, your coverage should be 100% of the loan. If applying jointly, calculate each applicant's income proportion. Example: Primary applicant earns S$8,000, co-applicant earns S$5,000. Total household income is S$13,000. Primary applicant's proportion is 61.5%, co-applicant's is 38.5%.

Step 3: Calculate Coverage for Each Applicant

Multiply the outstanding loan balance by each applicant's income proportion. Using the example above: Primary applicant coverage = S$470,000 × 61.5% = S$288,550. Co-applicant coverage = S$470,000 × 38.5% = S$180,950. Together, they maintain 100% coverage of the outstanding loan.

Step 4: Verify Against Industry Benchmarks

The industry-recommended benchmark for death and TPD coverage is 9 times your annual income.[7] If the primary applicant earns S$96,000 annually (S$8,000 × 12), the recommended coverage is S$864,000. If your mortgage is only S$500,000, you're adequately covered. If your mortgage is S$900,000, you may want to supplement mortgage insurance with additional term life insurance to reach the 9x benchmark.

Step 5: Account for CPF Deductions

If using HPS, premiums are automatically deducted from your CPF Ordinary Account. Ensure your CPF-OA balance can sustain these deductions throughout the loan tenure. You can check your estimated HPS premiums through the CPF website or by contacting HDB directly.

Common Coverage Mistakes That Reduce Approval Chances

Underinsuring Your Portion: Some applicants attempt to reduce premiums by insuring less than their income proportion. Banks flag this as a red flag because it suggests financial strain. Maintain at least 100% coverage of your income proportion to strengthen your application.

Failing to Declare Pre-Existing Conditions: If you have health conditions that affect HPS eligibility, disclose this upfront during your mortgage application. Banks can work with you to arrange private insurance alternatives. Hiding health issues and then being denied HPS coverage during loan processing creates delays and may jeopardize approval.

Ignoring Portability Issues: HPS coverage is not portable—if you upgrade properties, you must reapply and may face higher premiums or rejection based on age or health changes.[2] If you plan to upgrade within 10 years, consider private mortgage insurance instead, which remains portable and can follow you to your next property.

Neglecting Joint Applicant Coverage:

References

1. Singapore Property Market Analysis 1 (2025)
2. Singapore Property Market Analysis 2 (2025)
3. Singapore Property Market Analysis 7 (2025)
4. Singapore Property Market Analysis 3 (2025)