MRTA vs Term Insurance for Mortgage Protection: How to Improve Your Approval Chances
When applying for a home loan in Singapore, banks require mortgage protection insurance to safeguard both your family and their investment. The two main options—Mortgage Reducing Term Assurance (MRTA) and Level Term Insurance—serve different purposes, and choosing the right one can significantly impact your loan approval chances and long-term financial flexibility. At Homejourney, we prioritize helping you make informed decisions that protect your family while optimizing your borrowing power.
Understanding the differences between these insurance types isn't just about cost—it's about structuring your mortgage application to meet bank requirements and position yourself as a lower-risk borrower. This guide breaks down how each option works, which one banks prefer, and strategic steps to strengthen your approval chances.
Understanding MRTA: The Cost-Efficient Option
Mortgage Reducing Term Assurance (MRTA) is a decreasing term insurance policy designed specifically to cover your outstanding mortgage balance.[1] As you repay your home loan, your coverage amount decreases proportionally, mirroring the declining debt. This structure means MRTA premiums are typically lower than other mortgage insurance options because the insurer's risk decreases over time.
For example, if you take a $600,000 mortgage over 25 years, your MRTA coverage starts at $600,000 but gradually reduces as you make monthly payments. After 12 years, your outstanding balance might be $350,000, and your MRTA coverage would align with that amount.[1]
MRTA is mandatory when using CPF for private property purchases and is often bundled with housing loans at preferential rates by banks.[1] The key advantage for loan applications is that banks view MRTA as a streamlined, purpose-built solution that directly addresses their primary concern: ensuring the mortgage gets paid off if something happens to you.
Level Term Insurance: The Flexibility Alternative
Level Term Insurance maintains a fixed coverage amount throughout the entire policy term, regardless of how much of your mortgage you've repaid.[2] If you secure a $600,000 level term policy for 30 years, that $600,000 coverage remains constant until the policy expires.
This stability comes with a trade-off: level term premiums are higher than MRTA because the insurer maintains consistent risk exposure.[4] However, this higher cost buys you significant flexibility. The payout isn't automatically directed to your lender—your designated beneficiary receives the full amount and can use it for any purpose, including paying off the mortgage, covering other debts, or supporting the family.[1]
Critically, level term insurance is portable across multiple properties and refinancing scenarios.[1] If you sell your home, refinance with a different bank, or purchase a second property, your level term coverage continues without interruption or reapplication. This portability is valuable for your long-term financial strategy, even if it doesn't directly impact your current loan application.
How Banks Assess Mortgage Insurance in Loan Applications
Banks evaluate mortgage protection insurance through several lenses when processing your application. First, they verify that you have adequate coverage relative to your loan amount. Most banks require coverage equal to at least your full mortgage amount, though some may accept lower coverage if you're making a substantial down payment.
Second, banks assess the insurance provider's financial stability and the policy's terms. MRTA policies bundled with your housing loan application typically receive automatic approval because the bank controls the insurance arrangement. When you bring your own level term insurance, banks conduct additional underwriting to confirm the policy meets their requirements.
Third, your insurance approval reflects your insurability. If you're declined for insurance due to health issues or occupational risks, banks may view this as a red flag for your overall loan application. This is where starting the insurance process early—before submitting your mortgage application—strengthens your approval chances significantly.
Strategic Steps to Improve Your Mortgage Approval Chances
Step 1: Get Pre-Approved for Insurance Before Applying for Your Loan
Don't wait until you've submitted your mortgage application to arrange insurance. Apply for insurance pre-approval 2-4 weeks before approaching banks. This demonstrates to lenders that you're a serious, organized applicant who has already cleared a significant hurdle. If you're declined for insurance, you'll have time to address the issue or explore alternatives rather than having your mortgage application stalled.
For MRTA, contact insurance providers directly or work through your preferred bank's insurance partner. For level term insurance, get quotes from multiple providers to secure the best premium. Document your insurance approval letter—banks want to see this.
Step 2: Choose MRTA for Streamlined Approval, Level Term for Future Flexibility
If you're a first-time buyer focused on getting approved quickly and cost-efficiently, MRTA bundled with your housing loan is the pragmatic choice. Banks process MRTA applications as part of the mortgage workflow, reducing friction and approval timelines.[1] You'll benefit from lower premiums and automatic integration with your loan terms.
If you're refinancing, planning to upgrade properties within 10 years, or want maximum flexibility in how insurance payouts are used, level term insurance is worth the premium premium despite potentially longer underwriting.[2] The portability advantage compounds over your lifetime—you're essentially "locking in" your insurability at your current age and health status.
Step 3: Optimize Your Debt-to-Service Ratio (TDSR) Impact
Banks calculate your TDSR by dividing your total monthly debt obligations (including the new mortgage payment plus insurance premium) by your gross monthly income. The maximum TDSR threshold is typically 60% for most borrowers.[1] Your insurance premium directly affects this calculation.
MRTA premiums are lower, which means a smaller monthly obligation and a better TDSR ratio. If you're borderline on approval, choosing MRTA over level term insurance could be the difference between approval and rejection. Calculate both scenarios using Homejourney's mortgage eligibility calculator at Bank Rates to see your exact borrowing power under each insurance option.
Step 4: Ensure Full Coverage for Your Loan Amount
Banks require insurance coverage to match your loan amount, not your property value. If you're purchasing a $800,000 property with a 25% down payment ($200,000), your loan is $600,000—and your insurance must cover at least $600,000.[1]
Underinsurance is a common approval blocker. Verify your coverage amount matches your loan amount exactly. If you're arranging level term insurance independently, request a quote for the full loan amount, not a round number that might fall short.
Step 5: Leverage Homejourney's Multi-Bank Application Process
Different banks have different insurance requirements and preferences. Some prefer MRTA bundling, while others accept external level term policies more readily. Rather than guessing which bank will approve you fastest, submit applications to multiple banks simultaneously through Homejourney's platform.
Use Homejourney's multi-bank application feature to send your details to DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, and other major lenders in one submission.Bank Rates Each bank will specify their insurance requirements in their loan offer. By comparing offers side-by-side, you'll see which banks have the most favorable insurance terms and approval timelines for your situation.
The Singpass/MyInfo integration at Homejourney auto-fills your income, employment, and CPF data instantly, reducing application errors that could delay approval. This streamlined process is particularly valuable when coordinating mortgage and insurance applications simultaneously.
Documentation Checklist for Insurance Approval
Prepare these documents to accelerate insurance approval alongside your mortgage application:
- Valid NRIC and passport copy
- Recent payslips (last 3 months) confirming your income
- Employment letter on company letterhead stating your position, salary, and employment duration
- Medical declaration form (insurers will provide this)
- Bank statements (last 3 months) showing financial stability
- CPF statement showing your CPF balance (if using CPF for down payment)
- Property purchase agreement or letter of intent
- Proof of identity for your designated beneficiary
Having these documents ready before approaching insurers or banks demonstrates preparedness and reduces approval timelines by 1-2 weeks. This is particularly important if you're working with multiple banks simultaneously.
Common Approval Mistakes to Avoid
Mistake 1: Applying for insurance after submitting your mortgage application. This creates delays because banks want to see insurance approval as part of your complete application package. Apply for insurance first, then use the approval letter to strengthen your mortgage application.
Mistake 2: Underestimating insurance premiums in your affordability calculations. Many first-time buyers forget to factor insurance costs into their monthly obligations. This inflates their perceived borrowing power and can lead to over-leverage. Always include insurance premiums when calculating your maximum affordable mortgage using Homejourney's eligibility calculator.
Mistake 3: Choosing insurance based on premium alone without considering portability. While MRTA is cheaper, if you plan to upgrade properties or refinance, you'll face new insurance applications at higher ages and potentially higher premiums. Level term insurance locked in at age 30 remains portable throughout your lifetime—the initial premium difference often pays for itself across multiple properties.
Mistake 4: Not disclosing health conditions or occupational risks. If you fail to disclose relevant health information and it's discovered later, your insurance claim could be denied, jeopardizing your family's protection and your bank's security. Always provide complete, honest medical information to insurers.
Comparing Approval Timelines and Outcomes
MRTA bundled with your housing loan typically processes in 5-7 business days because the bank controls the entire workflow. Level term insurance through external providers usually takes 7-10 business days due to additional underwriting steps. However, the difference is often negligible if you start the process early.
More importantly, approval rates differ by insurance type and lender. MRTA bundling has near-automatic approval rates (95%+) because banks manage the underwriting. External level term insurance approval rates depend on the insurer's underwriting standards—typically 85-92% for standard-risk applicants.
If you have any health complications, occupational risks, or lifestyle factors that might affect insurability, start with MRTA through your preferred bank. If that's declined, you can then explore level term insurance from specialized insurers who may have more flexible underwriting criteria.
Using Homejourney to Optimize Your Insurance and Loan Strategy
Homejourney's integrated platform helps you coordinate insurance and mortgage decisions strategically. Start by calculating your mortgage eligibility and affordability using our built-in calculator at Bank Rates . This tool shows you how different insurance options affect your borrowing power and monthly obligations.
Next, compare current mortgage rates across all major banks to understand which lenders offer the best terms for your situation. Some banks bundle MRTA at preferential rates, while others may offer better base rates if you bring your own level term insurance. Seeing all options side-by-side helps you make the optimal choice.
Finally, submit your mortgage application through Homejourney's multi-bank platform. By sending one application to multiple banks simultaneously, you'll receive competing offers within 3-5 business days. Each offer will specify insurance requirements, allowing you to make a fully informed decision about which bank and insurance combination best serves your needs.
Homejourney's mortgage brokers are available to provide personalized guidance throughout this process. When you apply via the bank-rates page, you can connect with our team to discuss insurance options, approval strategies, and long-term financial planning specific to your situation.
Frequently Asked Questions
Can I switch from MRTA to level term insurance after my mortgage is approved?
Yes, but it's not straightforward. Most banks require MRTA or equivalent coverage throughout the loan term. If you want to switch to level term insurance, you'd typically need to refinance your entire mortgage, which involves new underwriting and fees. It's more efficient to choose the right insurance type upfront. However, if you're refinancing anyway (to capture better rates or consolidate debt), switching insurance types becomes part of that process.
What happens to my insurance if I refinance my mortgage?
MRTA policies end when you refinance because they're tied to your original loan.[1] You'll need to purchase a new MRTA or level term insurance policy with your refinancing bank. Level term insurance, by contrast, continues regardless of refinancing—you don't need to reapply or undergo new underwriting.[2] This is a significant advantage if you plan to refinance within 5-10 years to capture better rates.
Does having better insurance approval improve my mortgage approval chances?
Indirectly, yes. Insurance approval demonstrates that you're an acceptable risk to underwriters, which gives banks confidence in your overall creditworthiness. However, mortgage approval depends primarily on your income, credit score, employment stability, and TDSR ratio. Insurance approval is a supporting factor, not the deciding factor. That said, insurance denial could trigger mortgage denial if the bank interprets it as a sign of undisclosed health or occupational risks.
Should I buy extra coverage beyond my loan amount?
With MRTA, coverage is limited to your loan amount by design.[1] With level term insurance, you can purchase coverage exceeding your mortgage to provide additional family protection. For example, you might buy $800,000 level term coverage even though your mortgage is $600,000. The extra $200,000 provides a financial cushion for your family beyond mortgage payoff. This is worth considering if you have dependents or other financial obligations beyond your home loan.
