Choosing mortgage insurance in Singapore

Buying a home concentrates risk. A large loan sits against a single asset that also anchors your family’s daily life. If something happens to the person who pays that loan, the financial shock often arrives before anyone has time to process the emotional one. That is the gap mortgage insurance is designed to close. In Singapore there are three common ways to do it. HDB buyers who use CPF savings for monthly instalments are covered through the Home Protection Scheme, a mortgage-reducing plan administered by CPF Board. Private property owners typically look at Mortgage Reducing Term Assurance from insurers. Some households choose level term life instead, sizing the sum assured to their mortgage and broader protection needs. Understanding the differences matters more than the labels because the right structure depends on how you finance your flat, the type of property you own, and how portable you need your cover to be.

All mortgage insurance models serve the same purpose. They clear your outstanding housing loan if you die, suffer a terminal illness, or become totally and permanently disabled during the policy period. The legal intent is simple. Your family should not be forced to sell the home or scramble to refinance during a crisis. The design differences sit in how coverage declines or stays level over time, where premiums are paid from, and whether the payout is tied to the loan or can be used more flexibly.

The Home Protection Scheme is compulsory if you use CPF savings to pay your HDB loan. Coverage ends when the loan is fully paid or when you reach age 65, whichever happens first, and CPF deducts premiums from your Ordinary Account. You do not pay for the entire period. The premium term is set at 90 percent of the coverage period, so a 30-year HPS cover is paid for 27 years, not 30. These two features lower friction for households that prefer to keep cash free for renovations, furniture or an emergency fund, and they ensure a minimum level of protection for CPF-serviced HDB loans even when other insurance lapses during busy years.

HPS is not a private property product. It applies to HDB flats and is triggered by using CPF for instalments. If you service an HDB loan entirely in cash, HPS is optional, although CPF Board still encourages coverage. If you own private property, you will need a private mortgage policy or a term plan sized to your loan, since HPS does not cover condominiums, landed homes or ECs.

Mortgage Reducing Term Assurance is the private-sector cousin of HPS. The sum assured starts near your loan amount and falls broadly in line with the scheduled balance over time. That design matches a bank mortgage’s risk curve, providing the most cover when your loan is largest and the least once you are near the finish line. Because MRTA is tied to a specific loan profile, it is usually cheaper than a level term policy for the same initial face value, especially in the early years. The tradeoff is narrower flexibility. The payout is primarily intended to retire the mortgage, not to fund broader household needs.

MRTA can be attractive when you expect to hold the same property and loan structure for most of the term, when you prefer the psychological comfort of a cover that mirrors the debt trajectory, or when premium budgets are tight during the first decade of ownership. It is less attractive if you plan to refinance often, restructure tenure significantly, or anticipate moving homes before mid-term, because tying coverage to a specific amortisation path can create mismatches that need administrative updates.

A level term life policy looks different. The coverage amount stays constant throughout the policy period, whether that is 20, 25 or 30 years. If you choose a sum assured that cleanly covers your loan, a claim will retire the mortgage at any point in the term. If you choose a larger sum, the excess can help dependents with education, daily expenses or caregiving. Premiums also stay flat, which spreads the cost more evenly across your working years. Households that want portability value this structure because you can refinance, move, or rent out the home without touching the policy. The cost per dollar of initial cover may be higher than MRTA, but the utility per dollar can be higher too if you need coverage that is not constrained to the bank loan. That flexibility is the main reason many couples use level term to back a mortgage even when a lender does not require it.

Home insurance sits in a separate lane. It protects the building and contents against events such as fire or certain types of water damage. It does not pay your mortgage if you pass away or become disabled. It can be mandatory by contract for certain loans, but it is not a substitute for mortgage insurance. A robust cover plan often includes both. One protects the asset. The other protects the family’s ability to keep it.

The size of your loan is the biggest driver of how much mortgage insurance makes sense. That is where Singapore’s loan-to-value and downpayment rules matter in practice. For HDB loans, the LTV limit was lowered to 75 percent with effect from 20 August 2024. This tightened an earlier 80 percent limit and brought HDB loans in line with bank loans for first-property buyers, which remain at 75 percent. The policy goal is prudent leverage and a gradual cooling of the resale market. If you borrow less, your coverage need is lower. If you borrow at the maximum limit, your protection need is higher in the early years.

For bank-financed purchases, MAS maintains LTV caps that depend on whether the loan extends beyond standard tenure thresholds and your age at the end of term. Within the common case of a 75 percent LTV for a first loan, at least 5 percent of the property value must be paid in cash. The rest of the downpayment can be funded from CPF Ordinary Account savings. These regulatory parameters are not just procedural. They define the portion of risk you have shifted away from debt and therefore the portion of risk you still need an insurance policy to absorb.

If you already put down a large cash or CPF downpayment, for example 30 to 40 percent, the mortgage you carry will be smaller and declining faster relative to the property value. In that scenario a level term policy you already have for family protection may be adequate to cover the outstanding housing loan, especially once you pass the middle of the amortisation schedule. If your downpayment is closer to the minimum, your early-year exposure is larger and the case for mortgage-specific coverage like HPS or MRTA is stronger because the policy is working hardest during the years when you are most leveraged.

Imagine two couples buying similar resale flats. One puts down 35 percent by combining savings and CPF, the other puts down 25 percent with the minimum cash portion required for their bank loan. The first couple’s outstanding balance drops quickly. Their marginal utility from a dedicated mortgage-reducing policy is lower because the risk that remains is already smaller and shrinking steadily. The second couple’s monthly exposure is larger and will stay larger for longer, particularly if they stretch the tenure to manage cash flow. A claim in year three or four would need to retire a high balance. In that case mortgage-reducing cover is working exactly as designed.

All insurance is underwritten with age and health in mind. Mortgage-linked products are no exception. The earlier you apply, the more likely you are to qualify for standard rates and fewer exclusions. If you have pre-existing conditions such as diabetes or heart disease, expect medical questionnaires, potential check-ups, and in some cases partial cover or declined applications. HPS has its own health requirements. If you use CPF for your HDB instalments and do not meet them, you may be exempted from HPS, in which case you must arrange alternative coverage to meet lender and family-protection needs. Even when underwriting feels tedious, it reflects the reality that disability or a major illness is as financially disruptive as death. The right policy should be calibrated to all three events.

Portability is the quiet feature most people only think about when life changes. If you expect to refinance regularly to secure better rates, switch from a floating to a fixed package, sell the flat to move closer to family, or restructure tenure as your income rises, a level term plan will follow you without administrative work. MRTA is usually tied to a loan profile. It can be adjusted, but changes add friction and can leave you temporarily over- or under-insured if the balance no longer matches the schedule that the policy assumes. HPS sits in between. It is automatically aligned to your HDB loan when you use CPF OA, which is convenient, but it is not portable to private property. If you plan to transition from HDB to a condominium later, decide early whether you prefer to keep one level term policy through both chapters rather than juggling multiple mortgage-reducing covers along the way.

A 75 percent LTV sounds like a single number. In practice it also encodes how vulnerable your household balance sheet is during the first seven to ten years of ownership. The higher the LTV, the more your family depends on one or two incomes arriving on time every month. If you have children or caregiving duties that limit how much a surviving partner can earn in the short term, that fragility is higher than a spreadsheet suggests. This is why lenders, CPF Board and MAS have hard limits. They are a public guardrail against risks that are easy to underestimate. For HDB buyers, the move from an 80 percent to a 75 percent LTV tightened that guardrail, and the change applies at application milestones spelled out in HDB guidance and ministerial remarks. If you are calculating protection today, use 75 percent as the working benchmark for HDB and bank loans unless you know you sit in a category with a lower cap due to tenure or additional property rules.

How you hold the title matters. Joint tenants each own the whole with rights of survivorship. Tenants-in-common each own a stated share. Mortgage insurance decisions should be consistent with that legal structure. If you are joint tenants and one of you passes away, the survivor automatically owns the flat but must still meet the instalments or redeem the loan. A policy that retires the entire balance solves both issues. If you are tenants-in-common, covering each owner’s share of the outstanding loan can prevent disputes, unwanted forced sales, and complicated negotiations with heirs. This is a planning point, not just an insurance choice. Make it explicit.

Start with the property type and financing source. If you have an HDB flat and use CPF for instalments, HPS will be required and is designed for exactly this use case. Confirm your coverage adequacy when you refinance or restructure the loan, and remember you pay premiums for only 90 percent of the cover period. If you buy private property and expect to hold the same mortgage for a long stretch, an MRTA policy that mirrors the loan can be a cost-efficient way to protect the home during the years of highest leverage. If your life is likely to involve moves, refinancings, or broader needs beyond loan redemption, a level term plan sized to your mortgage and dependents provides more flexibility and can outlast any one property. If you already have a term plan for family protection, check whether the sum assured comfortably covers the mortgage in the early years. If it does, you may not need an additional mortgage-specific policy.

Use the current LTV rules and cash requirement as a stress test. If you could not increase your cash downpayment by another five percentage points without selling investments at a loss or dipping below a prudent emergency fund, you are likely operating close to your comfort boundary. In that case mortgage-reducing cover is not redundant. If you could repay the remaining loan with existing level term cover and still leave enough for dependents to manage expenses for several years, a dedicated MRTA might be optional. If you are on an HDB loan and using CPF OA, HPS gives you a floor of protection by design, and the premium design reduces payment strain by making only 90 percent of the period payable from OA. Your job then is to top up protection around that floor rather than duplicate it.

Insurance is planning, not a product on a shelf. The right mortgage cover is the one that lines up with how you actually finance your home, how portable you need protection to be, and what today’s rules allow you to borrow. In Singapore that means paying attention to HPS requirements when CPF is used for HDB loans, knowing that HPS insures up to age 65 or until the loan is cleared, and understanding that the present HDB LTV limit is 75 percent, matching bank loans for first properties, with at least 5 percent cash down on bank-financed purchases. Build your choice on those facts and on your family’s real cash flow, not on labels. Plans change. A well-chosen policy should not have to.