MRTA vs Term Insurance for Mortgage Protection: Frequently Asked Questions
Mortgage Reducing Term Assurance (MRTA) and term insurance both protect your home loan, but MRTA covers only the decreasing loan balance with payouts to the bank, while term insurance offers fixed coverage payable to your beneficiaries for flexible use.[1][2][3] This Homejourney cluster article answers key questions for Singapore property buyers, linking to our pillar guide on MRTA vs Term Insurance: Best Mortgage Protection Guide.
What is MRTA and How Does It Work in Singapore?
MRTA, or Mortgage Reducing Term Assurance, is a decreasing term policy tied to your home loan that pays the outstanding balance to your lender if you die, become terminally ill, or totally permanently disabled (TPD).[1][2][3] Coverage starts at your initial loan amount—say S$800,000 for a Punggol HDB flat—and reduces yearly based on your mortgage repayment schedule, typically matching interest rates of 1-7% over 10-35 years.[1]
In Singapore, banks like DBS, OCBC, and UOB often bundle MRTA with loans at preferential rates, with premiums fixed upfront and financed into the loan.[2][3] No medical exam is needed for sums under S$1 million if bought within three months of loan approval.[1] For HDB flats using CPF, note that Home Protection Scheme (HPS) is mandatory unless exempted, but MRTA suits bank loans for private properties.[2][8]
What is Term Insurance for Mortgage Protection?
Term insurance (or level term assurance) provides a fixed sum assured—e.g., S$1 million—throughout the policy term, paid to your nominated beneficiaries upon death or TPD, not directly to the bank.[2][3][7] This term life mortgage coverage exceeds your loan balance, allowing funds for living expenses, education, or other debts beyond just the mortgage.[2]
Unlike MRTA's reducing cover, term insurance remains constant, making it portable across properties or refinancing—ideal for HDB upgraders or investors.[2][3] Premiums are level but often higher initially; shop via Homejourney's partners like Prudential or Singlife for competitive insurance for home loan rates.
MRTA vs Term Insurance: Key Differences
The core distinction is coverage type: MRTA decreases with your loan (e.g., from S$800k to S$400k over 15 years), keeping premiums low at 0.1-0.3% of loan annually, while term insurance stays fixed, offering broader protection.[1][2][3]
| Feature | MRTA | Term Insurance |
|---|---|---|
| Coverage Amount | Decreases over time[1][3] | Fixed throughout[2][3] |
| Payout To | Bank/Lender[1][2] | Your Beneficiaries[2][7] |
| Cost | Lower, often bundled[3] | Higher but flexible[2] |
| Portability | Ends with loan[2] | Portable[2][3] |
Under MAS rules, LTV limits (75% for bank loans on first properties) apply, so align insurance with your borrowing power.[2] For best mortgage protection, term insurance wins for families needing surplus coverage.
Which is Cheaper: MRTA or Term Insurance?
MRTA is typically cheaper for pure mortgage coverage—e.g., S$1,200-2,000 annual premium for S$800k loan vs S$2,500+ for equivalent term insurance—since it only covers the reducing balance.[3] Premiums are single upfront or financed, deducted via CPF for HDB or cash for private loans.[2]
Term insurance costs more but provides value if you need coverage beyond the loan, like for dependents. Use Homejourney's mortgage calculator to model scenarios with current SORA rates from DBS, OCBC, UOB.
Pros and Cons: Making the Right Choice
- MRTA Pros: Affordable, simple, no medical checks, automatic bank payout.[1][3]
- MRTA Cons: Non-portable, no extra funds, tied to one loan.[2]
- Term Insurance Pros: Flexible payout, portable, covers more needs.[2][7]
- Term Insurance Cons: Higher cost, requires underwriting.[3]
For first-time HDB buyers in areas like Tengah or Kallang, pair HPS with term insurance if using bank loans.[8] Investors with multiple properties prefer term insurance's portability. Always check TDSR/MSR eligibility first via Homejourney bank rates.
Actionable Steps to Choose Your Mortgage Protection
- Calculate loan amount using Homejourney's eligibility calculator—input income, CPF to estimate under 2026 TDSR (60% debt servicing).[2]
- Compare quotes: View live rates from DBS, OCBC, UOB, HSBC at Homejourney bank-rates.
- Assess needs: If single-property focus, get MRTA; for family/flexibility, term insurance.
- Apply via Singpass on Homejourney for multi-bank offers in one go—auto-fills income/CPF data.
- Consult our mortgage brokers for personalized advice (disclaimer: not financial advice; seek professional review).
Related: See HDB specifics in our HPS guide or HDB vs bank loan comparison.
Frequently Asked Questions (FAQs)
1. Is MRTA mandatory for Singapore home loans?
No, but banks may require it or equivalent for high LTV loans (e.g., 75%). HPS is mandatory for CPF HDB loans unless exempted.[2][8]
2. Can I cancel MRTA and switch to term insurance?
Yes, but new policy needed; MRTA ends with loan. Term insurance is portable for refinancing.[2][3]
3. Does term insurance cover TPD like MRTA?
Yes, most term life mortgage policies include TPD/terminal illness, with fixed payout to beneficiaries.[1][7]
4. What's the best mortgage protection for HDB upgraders?
Term insurance for portability when selling and buying new flats; check MSR limits.[2]
5. How do premiums work with CPF?
MRTA/HPS deduct from CPF OA; term insurance usually cash/monthly. Use Homejourney to compare.[2][8]
Secure your home loan protection today with Homejourney's trusted tools. Visit bank-rates to compare MRTA vs term insurance, calculate affordability, and apply securely via Singpass. For full details, read our pillar: MRTA vs Term Insurance Guide. Homejourney prioritizes your safety with verified data and transparent advice.
