Bought A New House? You Will Need THIS!

For most of us, when we buy a house, we’re not just thinking of ourselves. We’re also thinking of our family and leaving a legacy behind. Mortgage loans usually take over 20 years to pay off, and a lot can happen within that time. What happens to your family if you passed away or were unable to work? Especially if you were the sole breadwinner in the family, how would your family bear the mortgage cost? This is where mortgage insurance becomes important.

What is mortgage insurance and how does it work?

First, let's understand what occurs if you are unable to make your loan repayments: You will either have to sell the house, or the bank will seize it, leaving your family without a home. Doesn't sound good, right? However, if you had bought mortgage insurance, your family would enjoy financial coverage for the housing loan you owe should you be unable to pay off your home loan repayments. If you have passed away, suffered a total and permanent disability (before the age of 70), or have a terminal illness ,your mortgage insurance would pay out a lump sum that could be used to repay the outstanding loan amount, ensuring that your family would still have a roof over their heads in case of unexpected events.

It is recommended to get a mortgage insurance with a sum assured equivalent to your mortgage loan, and a policy term that is the same as the mortgage loan tenure. You can also choose from a range of interest rates to ensure that your mortgage loan is covered. Keep in mind that your sum assured of your mortgage insurance is not levelled and will decrease over the years, similar to your mortgage loan amount.

Mortgage Insurance vs Home Insurance — What’s the difference?

Home insurance provides payouts when something happens to your property and the contents within (e.g. your furniture) such as a fire, or a flood. Mortgage insurance helps if something happens to you – so that you (or your family) can continue paying off your home loan. The lump sum provided by mortgage insurance to offset your loan eliminates the risk of the banks repossessing your house.

Do I need mortgage insurance?

Ask yourself this: Can your family pay your mortgage without you? Even if they could, it would be a huge burden. And if they couldn’t, they would have to deal with the difficult and complicated task of selling the property at an already difficult time. If you are a parent and something bad has happened to both of you and your spouse, having mortgage insurance ensures that at least your children are protected and will have a home to their names. Note that the Home Protection Scheme (HPS) is compulsory if you are paying for your HDB flat using your CPF. However, if you have mortgage insurance, you can apply to be exempted from HPS.

Mortgage insurance ensures your loved ones are taken care of.

At the end of the day, we can’t control everything, but we can be prepared for what comes. Securing your family home for your family signifies your care for them. Protect your family from having to bear any outstanding loans in unexpected events. Give your loved ones peace of mind that their home will remain theirs in the event of any of life’s uncertainties.