HPS VS. MRTA VS. LEVEL TERM: CHOOSING THE RIGHT MORTGAGE INSURANCE FOR YOUR SINGAPORE HOME
Not all mortgage insurance is created equal. This guide breaks down the key differences between HPS, MRTA, and Level Term plans — so you can confidently choose the best protection for your home loan in Singapore.
LOOKING FOR MORTGAGE PROTECTION?
You get it. Protecting your home loan is a must.
You understand that if something unexpected happens to you, you don’t want your family to face the stress of paying off a huge mortgage on their own.
But now comes the next question: which type of mortgage insurance should you get?
You might have heard of the Home Protection Scheme (HPS) if you own an HDB flat. But you might also have heard friends talk about MRTA or even using a Level Term plan. It can all sound a bit confusing.
Don’t worry. This guide will break down the three main options for you in simple terms. We’ll look at what they are, who they’re for, and their pros and cons. By the end, you’ll be able to choose the right shield for your home and family.
Option 1: The Home Protection Scheme (HPS) – The HDB Default
If you own an HDB flat and use your CPF Ordinary Account (OA) savings to pay your monthly loan instalments, then HPS is probably already familiar to you. In fact, it’s compulsory.
How it works:
HPS is a mortgage insurance plan run by the CPF Board. The coverage amount is designed to decrease over the years, matching your declining HDB loan balance. If you pass away or become permanently disabled, the CPF Board pays the outstanding loan amount directly to HDB.
The Pros (What’s good about it?):
- Super Convenient: The best thing about HPS is its convenience. The annual premiums are automatically deducted from your CPF OA. You don’t have to worry about paying in cash. It’s a “set it and forget it” system.
- No Cash Needed: Because it uses your CPF savings, it doesn’t affect your monthly cash flow.
The Cons (What are the limitations?):
- It’s Not Portable: This is the biggest drawback. Your HPS cover is tied to your current HDB flat. The moment you sell your flat—for example, to upgrade to a bigger HDB or a condo—your HPS cover terminates. You will have to apply for new insurance for your next home, at an older age and likely a higher premium.
- No Flexibility: The payout goes straight to HDB to clear the loan. Your family doesn’t see a single cent of the cash. The coverage is strictly for the loan and nothing else.
HPS is best for: HDB owners who value convenience and prefer not to pay cash for their mortgage insurance. It’s a solid, basic safety net.
Option 2: Mortgage Reducing Term Assurance (MRTA) – The Private Equivalent
If you own private property, like a condo, or you’re an HDB owner paying your loan in cash (and thus not on HPS), an MRTA is the most direct equivalent to HPS.
How it works:
An MRTA is a type of term insurance where the coverage amount reduces every year. It’s designed to closely track the outstanding balance of your home loan. You buy it from a private insurance company.
The Pros (What’s good about it?):
- Tailor-Made for Loans: Its single purpose is to pay off a loan, so it does that job very well.
- Cheaper than Level Term: Because the coverage amount shrinks over time, the premiums for an MRTA are usually lower than for a Level Term plan with the same initial coverage. It’s a budget-friendly option.
The Cons (What are the limitations?):
- It Becomes Less Valuable: While your premium stays the same, your coverage gets smaller every year. In the last few years of your policy, you might be paying for very little coverage.
- Limited Flexibility: Like HPS, it’s designed just for the loan. If you refinance your loan with a different bank or for a different tenure, your MRTA might not fit perfectly anymore.
MRTA is best for: Private property owners or cash-paying HDB owners who want a no-frills, affordable plan that is specifically designed to cover their home loan and nothing more.
Option 3: Level Term Life Insurance – The Flexible Alternative
This is where things get interesting. A Level Term plan is not strictly a “mortgage insurance” plan, but many savvy homeowners in Singapore use it for this purpose because of its incredible flexibility.
How it works:
With a Level Term plan, the coverage amount stays the same throughout the entire policy term. If you buy a 30-year plan with $500,000 coverage, it will remain $500,000 on Day 1 and on the very last day of the policy.
If you pass away or become disabled, the full $500,000 is paid out in cash to your family (your chosen beneficiaries).
The Pros (What’s good about it?):
- Super Flexible: This is its superpower. Your family gets a large sum of cash. They can use it to pay off the mortgage, and any leftover money can be used for other critical needs, like daily living expenses, children’s education, or paying off other debts.
- It’s Portable: The policy is attached to you, not your property. If you sell your home and buy another one, the policy follows you. You don’t need to reapply for a new one. This is a huge advantage if your health changes over time.
- Your Family is in Control: The money goes to your loved ones, giving them the power to decide how best to use it.
The Cons (What are the limitations?):
- It’s More Expensive: Because the coverage amount doesn’t decrease, the premiums for a Level Term plan are higher than for an MRTA with the same starting coverage. You are paying for that valuable flexibility.
- Requires Discipline: Your family receives a lump sum of cash. They need the discipline to use it to pay off the mortgage first before using it for other things.
Level Term is best for: Homeowners who want more than just loan protection. It’s for those who want to provide a larger financial safety net for their family and value long-term flexibility and portability.
Head-to-Head: A Simple Comparison Table
Let’s see them all side-by-side.
Feature | HPS (HDB Default) | MRTA (Private Equivalent) | Level Term (Flexible) |
Coverage Amount | Decreasing | Decreasing | Stays Level |
Payment Method | CPF OA | Cash | Cash |
Beneficiary | HDB | The Bank / You | Your Family |
Portability | No | Sometimes | Yes |
Best For | HDB owners using CPF | Budget-conscious loan protection | Maximum flexibility & family protection |
Conclusion: Aligning Your Policy with Your Priorities
So, which one is right for you? There is no single “best” answer. It all comes down to your priorities.
The key trade-off is Cost vs. Flexibility.
- If your main goal is simply to get the most affordable coverage that is tailor-made to pay off your loan, then an MRTA (or the compulsory HPS for HDB owners) is a fantastic and efficient choice.
- If your priority is maximum flexibility, portability, and providing a larger cash buffer for your family that goes beyond just the home loan, then a Level Term plan is the superior, albeit more expensive, option.
So, ask yourself this simple question:
“Do I just want to make sure the loan is paid off, or do I want to give my family a larger safety net to cover the loan
Your answer to that question will clearly point you down the right path. It will help you choose the shield that doesn’t just protect your house, but truly protects your home and the people living in it.