Why Mortgage Insurance is the Backbone Your Home Loan Desperately Needs


Living in the world’s most expensive city can make you jaded towards a lot of financial schemes and pitches; however, property security is no joke that can be dismissed as a second-tier financial priority. In Singapore, property mortgage loans usually last for a period up to 35 years and beyond, and are one of the biggest financial commitments for citizens to follow through in their lifetime.

Unfortunately, the unpredictability of life is not something we can be cavalier about and override while formulating our financial plans. Therefore, mortgage insurance should be an integral part of every homeowner’s financial shield to cover their home loan in the event of serious disability or death that results in the loss of income of the family’s sole breadwinner.

Although life insurance payouts offer financial support in case you become a victim of horrendous circumstances, mortgage insurance can help better alleviate the primary expenditure that concerns most individuals – home loan repayments. Yes, mortgage insurance plans specifically eliminate the significant burden of extensive repayments off your shoulders and free your loved ones from that stress as well.

Before you zero in on the many mortgage insurance plans available in the market, it is essential to consider the following factors before making your final decision:

Home loan tenure

Assured sum on redemption of the policy

Premiums charged

Extent of coverage offered

Dissecting the Benefits Earned By Homeowners from Mortgage Insurance

Singaporeans are better familiar with the term Mortgage Reduced Term Assurance (MRTA), which is substituted for mortgage insurance. On redemption, the MRTA guarantees a fixed lump sum pay out, which progressively decreases as you pay off your home loan.

Since HDB homeowners already have the mandatory House Protection Scheme to serve this purpose, MRTA is only a matter of concern for private property owners.

Here are a few vital benefits you can enjoy as a homeowner by opting for MRTA:

Emergency Liquidity

In case you are assuming that you can simply sell your home to avoid a mountain of home loan repayments when you lose your job, you are gravely mistaken. It can take several months to advertise, negotiate and lock in a good buyer for your property. Therefore, you have to work around the illiquid state of your property and raise enough money to make the necessary loan repayments in the meantime.

MRTA coverage on the other hand, can easily provide the urgent financial liquidity needed by you to stay afloat.

Property Loan Tenure-Friendly Premiums

Many Singaporeans are reluctant regarding the payment of MRTA premiums when the expiry date of their term arrives. It is an obvious choice to make when they know the value of the assured sum has drastically reduced.

Fortunately, mortgage insurance dealers recognized this dilemma and only charge premiums for a certain part of the loan tenure. AIA happens to be one such institution that charges premiums only for 75% of your home loan period.

Affordable Premiums

When put up against the coverage offered by standard life insurance policies, MRTA premiums have proven to be 20-30% lesser than the costly premiums associated with life insurance coverage.

Despite the attractive cutbacks in premiums offered by a majority of insurance plans and significant periods of free coverage, MRTA premiums work out to be just as cost-effective as them. 

Transferability of Coverage

Transferability of financial coverage is something many Singaporean debtors like to consider at some point. Fortunately, MRTA is fully transferable, which means that you can extend the same coverage to a new property purchased by you once you sell your currently insured house.

In case you have paid off the home loan for your first property and wish to rent another one, you can transfer the remaining coverage of your MRTA plan onto the other property. 

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