Mortgage Insurance Singapore: Do You Need It? Homejourney's Complete Guide

When you're taking out a home loan in Singapore, one question often catches first-time buyers off guard: Do you need mortgage insurance? The answer isn't always straightforward, and the consequences of getting it wrong can be significant. This comprehensive guide breaks down everything you need to know about mortgage insurance in Singapore, from mandatory requirements to optional coverage options, helping you make the right decision for your family's financial security.

At Homejourney, we believe that informed homeowners make better financial decisions. That's why we've created this definitive resource on mortgage insurance—combining expert insights, current regulations, and practical examples to help you understand exactly what protection you need and why.

Table of Contents

1. What is Mortgage Insurance in Singapore?
2. Why Mortgage Insurance Matters for Your Family
3. Mandatory vs Optional: When Do You Really Need It?
4. Home Protection Scheme (HPS) Explained
5. MRTA: Beyond HPS Coverage
6. Level Term Insurance: An Alternative Approach
7. Comparing Your Mortgage Insurance Options
8. Real-World Cost Analysis: What You'll Actually Pay
9. Eligibility Requirements and Health Underwriting
10. HPS Exemptions and When to Apply
11. Making Your Decision: A Step-by-Step Framework
12. How Homejourney Helps You Navigate Mortgage Insurance
13. Frequently Asked Questions

What is Mortgage Insurance in Singapore?

Mortgage insurance is a financial safety net that protects your family from losing your home if you pass away, become terminally ill, or suffer total permanent disability (TPD). Unlike fire insurance or contents insurance—which protect the property itself—mortgage insurance specifically covers your outstanding housing loan balance.

Think of it this way: if you have a $500,000 mortgage and something happens to you, mortgage insurance ensures that your family isn't burdened with the remaining loan payments. The insurance payout clears the outstanding balance, allowing your loved ones to keep the property without financial hardship.

In Singapore, mortgage insurance comes in three primary forms: the Home Protection Scheme (HPS) for HDB properties, Mortgage Reducing Term Assurance (MRTA) for both HDB and private properties, and Level Term insurance as an alternative option. Each has different rules, costs, and coverage structures that we'll explore in detail.

Why Mortgage Insurance Matters for Your Family

Singapore's property prices are among the highest in the world, and most homeowners can only afford their property through a mortgage spanning 25-30 years. This creates a significant financial vulnerability: if the primary income earner passes away or becomes unable to work, the family faces an impossible choice between losing the home or struggling with unaffordable loan repayments.

Consider this scenario: A 35-year-old earner takes a $600,000 mortgage over 25 years. If they pass away in year 5, the family still owes approximately $540,000. Without mortgage insurance, the family must either refinance (difficult without the primary earner's income), sell the property, or default on the loan. With mortgage insurance, the outstanding balance is cleared immediately, and the family can keep their home.

This protection becomes even more critical when you consider that many Singaporean families are dual-income households where both partners contribute to mortgage payments. If one partner becomes unable to work, the other may struggle to maintain payments alone.

Beyond financial protection, mortgage insurance provides peace of mind. Knowing that your family's home is protected allows you to focus on building your life rather than worrying about "what if" scenarios.

Mandatory vs Optional: When Do You Really Need It?

When Mortgage Insurance is Mandatory

If you're buying an HDB flat and using CPF-OA (Ordinary Account) to pay your mortgage, the Home Protection Scheme (HPS) is mandatory. This is a regulatory requirement from the Central Provident Fund Board. You cannot opt out unless you apply for a specific exemption and meet strict criteria.

Banks may also require mortgage insurance as a condition of lending, particularly for larger loan amounts or if you have any health concerns. This is at the lender's discretion and varies by bank and loan size.

When Mortgage Insurance is Optional

If you're buying a private property (condo, landed house, or executive condominium) and financing through a bank loan without using CPF, mortgage insurance is typically optional—though your bank may still recommend or require it. Similarly, if you're an HDB buyer not using CPF for repayments, mortgage insurance is optional.

However, "optional" doesn't mean "unnecessary." Even when not required, most financial advisors recommend mortgage insurance to protect your family's financial security. The question isn't whether you can afford to skip it, but whether you can afford the consequences if you do.

Home Protection Scheme (HPS) Explained

What is HPS?

The Home Protection Scheme is a mortgage-reducing insurance product offered by the Central Provident Fund. It's specifically designed for HDB flat purchases and is compulsory for anyone using CPF savings to pay their mortgage.

HPS is a decreasing term insurance, meaning your coverage amount decreases over time as your mortgage balance shrinks. This makes sense because as you pay down your loan, you need less insurance coverage.

HPS Coverage Details

HPS covers you for:

• Death – Your outstanding mortgage is fully paid
• Terminal Illness – Your outstanding mortgage is fully paid
• Total Permanent Disability (TPD) – Your outstanding mortgage is fully paid

The coverage amount equals your outstanding loan balance, which decreases as you make payments. If you have a joint mortgage with your spouse, both partners must be insured. The CPF Board requires that you're covered for at least the proportion of monthly instalments you personally pay. For example, if you pay 70% of the monthly payment and your spouse pays 30%, you must be insured for 70% of the loan.

HPS Premium Calculation

Your HPS premium depends on several factors:

• Your age at the time of application
• Your health condition
• The loan amount
• The loan tenure (repayment period)
• Your outstanding loan balance

HPS premiums are automatically deducted from your CPF-OA each month, making it convenient but also non-negotiable. The premium adjusts annually as your outstanding balance decreases.

HPS Limitations

While HPS provides essential protection, it has several important limitations:

• Not Portable: If you sell your HDB flat and buy another property, your HPS coverage ends. You'll need to apply for new coverage at your new age, which means higher premiums.
• All-or-Nothing Approval: HPS either approves or denies your application based on health. There's no middle ground like "approved with exclusions" for pre-existing conditions.
• Age Limit: HPS coverage ends when you turn 65, even if your mortgage isn't fully paid. If your loan extends beyond age 65, you'll need private insurance for the remaining years.
• Limited Flexibility: You can't adjust your coverage amount or policy terms once approved.

MRTA: Beyond HPS Coverage

What is MRTA?

Mortgage Reducing Term Assurance (MRTA) is a private mortgage insurance product offered by banks and insurance companies. Like HPS, MRTA is decreasing term insurance where your coverage amount decreases as your loan balance shrinks.

The key difference: MRTA is available to anyone—HDB buyers, private property owners, and even those who want additional coverage beyond HPS. It's more flexible than HPS and can be tailored to your specific needs.

MRTA vs HPS: Key Differences

For HDB buyers using CPF, MRTA can be obtained as an alternative to HPS or as supplementary coverage. Many banks offer MRTA at competitive rates, sometimes cheaper than HPS premiums for the same coverage.

For example, a 40-year-old non-smoking male with a $600,000 home loan for 25 years might pay significantly less for MRTA coverage compared to HPS, while receiving equivalent protection.

MRTA Benefits

• Portable Coverage: Many MRTA policies can be transferred to a new property after 3 years, eliminating the need to reapply at an older age.
• Flexible Underwriting: Some MRTA policies offer "approved with exclusions" for pre-existing conditions, providing coverage even if you have health issues.
• Competitive Pricing: MRTA premiums are often lower than HPS, especially for younger applicants.
• Extended Coverage: MRTA can extend beyond age 65, providing protection for loans that extend into your late 60s.
• No CPF Deduction: MRTA premiums are paid directly to the insurance company, not deducted from CPF.

Level Term Insurance: An Alternative Approach

What is Level Term Insurance?

Level Term insurance is a different approach to mortgage protection. Unlike decreasing term insurance (HPS and MRTA), level term maintains a fixed coverage amount throughout the policy period.

For example, if you purchase a $600,000 level term policy, you'll have $600,000 coverage for the entire 25-year loan period, regardless of how much you've paid down.

When Level Term Makes Sense

Level term insurance is particularly valuable if:

• You want to leave an inheritance to your family beyond just clearing the mortgage
• You have other debts or financial obligations beyond the mortgage
• You're young and want to lock in lower premiums for life
• You want predictable, non-decreasing coverage

The trade-off is that level term premiums are typically higher than decreasing term insurance for the same initial coverage amount, since you're paying for more total coverage over the policy period.

Comparing Your Mortgage Insurance Options

Real-World Cost Analysis: What You'll Actually Pay

Example 1: HDB Buyer Using CPF (Age 35)

Scenario: You're 35 years old, purchasing an HDB flat with a $400,000 mortgage over 25 years, using CPF for repayments.

Your situation: HPS is mandatory. You'll pay HPS premiums automatically deducted from your CPF-OA each month. The premium starts higher when your loan balance is highest and decreases annually as you pay down the loan.

Approximate cost: Your HPS premium might range from $80-150 per month in the early years, decreasing to $20-40 in later years as your loan balance shrinks. Total premiums paid over 25 years might total $25,000-35,000.

Example 2: Private Property Buyer (Age 40)

Scenario: You're 40 years old, purchasing a $1.2 million condo with a $900,000 bank mortgage over 25 years.

Your situation: Mortgage insurance is optional, but your bank may recommend it. You compare MRTA and Level Term options.

MRTA Option: Approximately $150-250 per month, decreasing over time as your loan balance shrinks. Total premiums over 25 years: $45,000-75,000.

Level Term Option: Approximately $200-350 per month (fixed throughout). Total premiums over 25 years: $60,000-105,000. However, you maintain $900,000 coverage throughout, providing extra protection.

Example 3: MRTA Comparison - HPS vs Private MRTA

A 40-year-old non-smoking male with a $600,000 home loan for 25 years might pay:

• HPS: $120-180 per month (varies by health assessment)
• Private MRTA: $80-120 per month (often more competitive)
• Savings with MRTA: $40-60 per month, or $12,000-18,000 over 25 years

This is why many HDB buyers explore MRTA alternatives even when HPS is mandatory—the cost savings can be substantial while maintaining equivalent protection.

Eligibility Requirements and Health Underwriting

Age Requirements

Most mortgage insurance products have age restrictions:

• Minimum age: Usually 18 years old
• Maximum age: HPS covers until age 65; MRTA and Level Term typically extend to 70+
• Age at application: Your premiums are locked based on your age when you apply, so applying earlier generally means lower premiums

Health Underwriting Process

When you apply for mortgage insurance, the insurer assesses your health to determine eligibility and pricing. The process typically involves:

HPS Health Assessment: The CPF Board reviews your health declaration. They either approve you for full coverage or deny your application. There's no middle ground—you can't be approved "with exclusions."

Private MRTA/Level Term Assessment: Insurance companies may offer more flexibility. You might be approved for full coverage, approved with exclusions (certain conditions not covered), or denied. For example, if you have a history of high blood pressure that's well-controlled, you might be approved with an exclusion for cardiovascular events.

Medical Underwriting Requirements

For smaller loan amounts (typically under $1 million), many banks offer no medical underwriting—meaning you don't need a medical examination. For larger amounts, medical underwriting may be required.

If you have pre-existing conditions, be transparent in your application. Failing to disclose health issues can result in claim denials later.

HPS Exemptions and When to Apply

HPS Exemption Criteria

If you're an HDB buyer using CPF, you can apply for HPS exemption if you already have insurance coverage that meets these criteria:

• The policy covers your outstanding housing loan amount
• Coverage extends for the full loan tenure or until you turn 65 (whichever is earlier)
• The policy provides coverage for death, terminal illness, and TPD
• You're the policy owner or a named beneficiary

Acceptable policies for exemption include:

• Private MRTA or Level Term insurance
• Existing term life insurance policies
• Group insurance through your employer
• Some investment-linked insurance policies

Strategic Exemption Scenarios

Scenario 1: Switching to Cheaper MRTA – If you can obtain private MRTA at lower cost than HPS, apply for exemption and switch. You'll save money while maintaining equivalent protection.

Scenario 2: Existing Term Life Insurance – If you already have term life insurance that covers your mortgage amount, you may qualify for exemption without purchasing additional coverage.

Scenario 3: Employer Group Insurance – If your employer provides group life insurance covering your mortgage, you might qualify for exemption.

Important Exemption Considerations

Before applying for exemption, consider:

• Portability: If you later sell your HDB and buy another property, your private insurance may not transfer, leaving you unprotected during the transition.
• Coverage continuity: Ensure your alternative coverage won't lapse during the exemption period.
• Age impact: If your alternative coverage ends before your loan is paid off, you'll need new coverage at an older age (higher premiums).

Making Your Decision: A Step-by-Step Framework

Step 1: Determine Your Situation

Ask yourself these questions:

• Are you buying an HDB flat or private property?
• Will you use CPF for mortgage repayments?
• Is mortgage insurance mandatory for your loan?
• What's your age and health status?
• Do you have dependents relying on your income?

Step 2: Understand Your Requirements

If you're buying an HDB with CPF: HPS is mandatory unless you qualify for exemption. You must apply for HPS unless you have alternative coverage meeting CPF's criteria.

If you're buying private property: Mortgage insurance is typically optional, but your bank may recommend it. Assess whether the protection is worth the cost for your family situation.

Step 3: Evaluate Your Options

Once you understand your requirements, compare available options:

• Get HPS premium quotes (if applicable)
• Request MRTA quotes from your bank and other insurers
• Consider Level Term if you want extra protection
• Calculate total costs over your loan tenure

Step 4: Consider Your Family's Needs

Beyond cost, consider:

• Dependents: Do you have family members relying on your income? Mortgage insurance becomes more critical.
• Other debts: Do you have other loans or financial obligations beyond the mortgage?
• Inheritance goals: Do you want to leave assets to your family beyond just keeping the home?
• Future plans: Are you likely to upgrade properties or refinance?

Step 5: Make Your Decision and Document It

Once you've decided on your mortgage insurance strategy, ensure you:

• Complete all required applications
• Disclose health information accurately
• Keep policy documents in a safe place
• Inform your family about your coverage
• Review your coverage annually to ensure it remains adequate

How Homejourney Helps You Navigate Mortgage Insurance

At Homejourney, we understand that navigating mortgage insurance can be complex. That's why we've built tools and resources to help you make confident decisions.

Compare Bank Rates and Insurance Requirements

Different banks have different mortgage insurance requirements and recommendations. Visit Homejourney's Bank Rates to compare rates from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, and other major lenders. You'll see not just interest rates, but also each bank's mortgage insurance options and requirements.

Calculate Your Mortgage Eligibility

Our mortgage calculator helps you determine how much you can borrow and what your monthly payments would be. Understanding your borrowing capacity helps you assess what mortgage insurance coverage you'll need. Use our Bank Rates calculator to get instant estimates.

Apply to Multiple Banks Simultaneously

Rather than applying to each bank individually, Homejourney's multi-bank application system lets you submit one application and receive offers from multiple lenders. This is particularly valuable for comparing mortgage insurance requirements across banks. Apply via Bank Rates and connect with our Homejourney Mortgage Brokers who provide personalized guidance on insurance options.

Leverage Singpass Integration for Faster Processing

When you apply through Homejourney using Singpass/MyInfo, your income, employment, and CPF data are verified instantly. This speeds up the approval process and helps you get clearer information about your mortgage insurance requirements faster.

Access Expert Guidance

Homejourney's mortgage brokers understand the nuances of mortgage insurance in Singapore. They can help you:

• Determine whether you need mortgage insurance
• Compare HPS, MRTA, and Level Term options
• Evaluate exemption possibilities
• Understand how insurance affects your overall loan costs
• Navigate health underwriting requirements

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