Why Mortgage Insurance is Crucial in Singapore’s Rising Property Market

Singapore’s property market is renowned for its resilience and growth. While this is great for long-term investment, it also means hefty mortgage loans.  Here’s where mortgage insurance steps in, offering a safety net for you and your loved ones.

What is Mortgage Insurance?

Think of it as an insurance policy specifically designed for your housing loan. It safeguards your loved ones financially in case of unforeseen circumstances like death, terminal illness, or total permanent disability (TPD) that prevent you from making mortgage repayments.

How Does it Work?

Upon the occurrence of a covered event, the mortgage insurance pays out a sum assured, which is essentially the outstanding amount on your loan. This ensures your property isn’t lost, and your dependents aren’t burdened with the remaining debt.

What Does Mortgage Insurance Typically Cover?

Death

If the policyholder passes away, the insurance pays off the remaining loan balance, protecting your loved ones from inheriting the debt alongside the property.

Terminal Illness

In the unfortunate event of a terminal illness with a limited prognosis, the insurance payout can settle the outstanding loan, relieving financial stress during a difficult time.

Total Permanent Disability (TPD)

If you become permanently disabled and unable to work, the insurance can cover your mortgage payments, preventing foreclosure. 

Considerations Before Buying Mortgage Insurance

Here are some key considerations to make when deciding on mortgage insurance:

Loan Amount and Coverage: Tailor your sum assured to match your outstanding loan balance. Don’t over-insure or under-insure. As your loan reduces over time, you might consider a decreasing term plan that adjusts the coverage to reflect your remaining loan amount.

Policy Term: Ensure the coverage period aligns with your mortgage tenure. Don’t pay for coverage you won’t need.

Financial Health: Consider your existing life insurance coverage and overall financial situation. If you already have a substantial life insurance policy, mortgage insurance might be redundant.

HDB vs Private Property: HDB offers a mandatory Home Protection Scheme (HPS) for loans using CPF funds. However, private property owners need to purchase separate mortgage insurance. Carefully evaluate the coverage provided by HPS and see if it aligns with your needs. You might consider topping up with private mortgage insurance if the HPS coverage seems insufficient.

Family Situation: Do you have dependents who rely on you financially? A larger sum assured might be necessary if you have a young family who wouldn’t be able to manage the mortgage on their own.

Affordability: Factor in the cost of premiums when budgeting for your mortgage. There might be a trade-off between a more comprehensive plan and affordability. Compare quotes from different insurers to find the best value for your needs.

Future Plans: Consider your plans for the property. If you intend to sell it before the mortgage is fully paid off, you might not need long-term coverage.

FAQs on Mortgage Insurance in Singapore

Is mortgage insurance mandatory?

It’s mandatory for HDB loans with HPS, but optional for private property loans.

Who pays the premiums?

You, the policyholder, pay regular premiums throughout the policy term.

Can I cancel my mortgage insurance?

Yes, you can cancel your mortgage insurance without a surrender charge.

How much does it cost?

Premiums depend on factors like your age, health, loan amount, and chosen coverage. Get $1 million coverage from just $2/day by consulting Wealth Planner Singapore’s financial advisors.

Peace of Mind for a Rising Market

With ever-increasing property prices, mortgage insurance becomes even more crucial. It safeguards your investment and provides peace of mind, knowing your loved ones are protected in case of life’s uncertainties.

Remember, consulting a financial advisor can help you choose the right mortgage insurance plan based on your specific needs.

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