Mortgage Insurance Guide Singapore | How Mortgage Insurance Can Help?

Insurance | Mortgage Insurance
by Priyadarshini 23 June 2023

A home in Singapore is the most expensive purchase you will make. And you will spend a significant portion of your life repaying that mortgage. Mortgage insurance is one way to protect yourself against the unknown. It will provide financial coverage if you are unable to repay your loan. But what exactly is it, and for whom is it intended? In this blog, we discuss mortgage insurance guide Singapore.

Mortgage Insurance?

If something happens to your income and you fail to repay the mortgage, your home may no longer be yours. Mortgage insurance is intended to protect you and your family in the event that you are unable to make your mortgage payments. If you are unable to service your mortgage repayments for the duration of your home loan, you can make a claim with the insurer and have them pay off your home loan. Your mortgage insurance policy will only pay out if certain specified events occur that cause you or your family to be unable to make your loan repayments. And, as a result, put you at risk of having your home repossessed by a bank.

Is Mortgage Insurance and the Home Protection Scheme the same thing?

If you have an HDB flat and you are using your CPF savings to make monthly mortgage payments, you should already have mortgage insurance. This is the Home Protection Scheme (HPS), which you were automatically signed up for. As a result, if something were to happen to you, the CPF Board will pay the outstanding amount on your home loan. This ensures that your family does not lose the home. Joining the HPS is not required for HDB buyers who are not using CPF savings to repay their home loans. But you can still apply. You can also obtain your own mortgage insurance policy.

Purpose of Mortgage Insurance?

To begin, it is crucial you understand the ramifications of not being able to repay your home loan. Because your home has been used as collateral, the bank has the right to foreclose if you miss one too many repayments.  They will seize possession of your home, auction it, and use the proceeds to repay the money you owe them. If you and your family live in a home, you will also lose the roof over your heads. No one wants such a nightmare so, mortgage insurance is highly recommended.

However, there are some circumstances for which you should consider purchasing mortgage insurance. Here are some questions to consider:

Mortgage Insurance Guide Singapore

Can your Family Continue to make your Loan Re-payments in your Absence?

In case of unforeseen situations, the burden of continuing to make home loan repayments will fall on your family. If they are unable to repay the home loan, they must sell the property. Or else the bank will foreclose and auction the property to obtain the proceeds. But having mortgage insurance ensures that the home loan is repaid. This allows your family to keep the property without having to worry about the repayments.

Are you Making a Joint Purchase?

If you are purchasing a home with another person and are not fully responsible for the mortgage payments, you should probably get mortgage insurance. This will save both of you. As a result, if one person dies or is no longer able to work, the other will not be forced to give up the property. Mortgage insurance is available for those who hold the property as joint tenants as well.

Will your Family Live in the House you Bought?

If the house you’re paying for is occupied by your family and you’re the only one making loan payments, you should get mortgage insurance. And if you do not have insurance and your family is unable to repay the home loan, the property will be seized by the bank. In turn, leaving your family without a home.  Also, if you have children, you should probably purchase mortgage insurance. It is advisable not to leave a major loan repayment on your spouse, even if he/she can afford it. If something unfortunate happens to both you and your spouse, you will undoubtedly want to ensure your children’s future.

We hope our mortgage insurance guide Singapore, helps you make better financial decisions. Need more financial advice on insurance policies? Head to our blog section and read other insurance guides!

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