Why mortgage insurance is important in Singapore?

After the passing of a loved one, there may be debts, mortgages and/or bills to shoulder.

Who will assume these liabilities? What funds are available to pay them off? Fret not, Today’s topic will cover all these important points.

What is a mortgage?

A mortgage is a legal document that you offer to your lender in exchange for a legal title to your property. On the other hand, a home loan is one that you actually get a loan to buy a house. Therefore, a mortgage is one where the property serves as collateral, while a home loan can be secured or unsecured.

A person who takes out a mortgage is the “mortgagor” or the borrower.

Will my family and I inherit the mortgage from the Deceased Mortgagor?

Generally, you and your family will not inherit the mortgage if the mortgage was signed solely in the name of the deceased, meaning the deceased did not co-sign the mortgage with you or another family member.

If this is the case, the executor or administrator of the deceased’s estate (depending on whether the deceased had made a will) will sell the property to pay off the mortgage. However, if you or another family member co-signed the mortgage with the deceased mortgagor, then that person will inherit the mortgage.

The mortgage co-signer then assumes the deceased’s mortgage obligations as the sole debtor. What happens after that depends:

How the property was paid for (e.g. bank loan or CPF).
Whether the property is a private property or an HDB flat. If the deceased mortgagor paid for the property (whether private property or HDB flat) by bank loan
The surviving mortgagor must submit a Grant of Probate to the bank to prove that he has the right to take responsibility for the mortgage.

Due to the large number of documents required for a court application, it is certainly advisable to hire a lawyer to complete the paperwork to obtain the Grant of Probate.

Thereupon, the surviving mortgagor can discuss with the bank the possible ways to pay the mortgage, especially if he or she does not have the funds to do so.

What happens if we can’t pay off the mortgage loan?

If the party or the beneficiary is ultimately unable to repay the loan, the lending bank has the right to foreclose (repossess) the property.

If it is a private property, you should also find out to see if mortgage insurance has been purchased. This insurance, known as Mortgage Reduced Term Assurance (MRTA), can pay out a sum of money if one of the mortgage holders dies.

If the mortgagor had used his/her savings in the CPF account to pay the monthly loan instalments for his/her HDB flat, he/she would be placed under the Home Protection Scheme (HPS). If the mortgagor dies, the CPF Board will settle the outstanding home loan up to the amount insured directly with HDB or the bank that granted the home loan.

The Home protection scheme is mandatory and compulsory by the government for all persons who use their savings from their CPF account to pay for their HDB flat.

The HPS does not cover private residential properties such as Executive Condominiums (ECs) or privatised Housing and Urban Development Company (HUDC) flats.

You can apply for the HPS at the HDB Hub or any HDB branch if you wish to use your CPF to pay the monthly instalments of the housing loan. For more information on the HPS, click here.

What happens to the deceased’s Mortgage Debts?

Mortgage debts may arise if the mortgagor passes away and fails to make the monthly loan repayments.

The first option is to see if any of the family members can help deal with the debt. If so, you can put their name on the deed (a legal document of ownership of a property) and make them a co-debtor.

You can also find out about the legal procedures for clearing debts after the debtor’s death.

What happens to the deceased’s Hospital Bills?

If the deceased left medical bills, you can pay them through his or her Medisave account and/or MediShield Life (a mandatory basic health insurance plan for all Singapore Citizens and Permanent Residents).

Insurance claims can also be submitted under Dependents’ Protection Scheme (DPS), a term insurance policy that provides basic coverage of up to $46,000 to covered members and their families after the death of a covered member.

You can receive a further top-up of funds to pay for the deceased’s medical bills from the payment of the deceased’s CPF funds and/or funds in the bank account.

The events following the death of a loved one are fraught with many difficulties, not only emotional but also financial. It is therefore important to err on the side of caution and make adequate preparations in case of an unfortunate event.

That is the reason why Mortgage insurance is especially important.

What is Conveyancing?

This question has been asked by many expats whom I’ve met. Basically, Conveyancing is a transfer of property to another person.

Conveyancing is one of the necessary steps in buying or selling a property. A Solicitor or Conveyancer will liaise with the relevant parties in the transaction including estate agents, the seller or buyer, mortgage brokers, the buyer’s agent and lenders. They will offer their assistance to facilitate the transaction and have your best interests in mind.

The Solicitor or Conveyancer takes care of many of the formalities associated with the transaction. This includes confirming the settlement date and a breakdown of the monies that need to be adjusted, closed and paid to the parties involved. He will also ensure that the property is correctly transferred into the buyer’s name. The Solicitor or Conveyancer will review the contract of sale, including any special conditions, and advise you of your legal obligations.

The Solicitor or Conveyancer will also review all the documents attached to the contract, such as the Land Registry information, diagrams and council certificates, to ensure that nothing is overlooked. He should explain the documents and the small print before you sign anything.

So, what does a Solicitor or Conveyancer do for you?

Conveyancing is one of the most important services you will need when buying or selling a property. Solicitors and Conveyancers are knowledgeable about property law and can guide you through the conveyancing process. They offer a variety of services such as preparing documents, explaining the small print, researching a particular property and the title deed, calculating rates and taxes, carrying out a property settlement and looking up any easements or other information you may wish to obtain. You can also explain regulations that apply to estates, if applicable.

How much does a solicitor or conveyancer cost?

The fees for instructing a Conveyancer or Solicitor can depend on a number of factors relating to the transaction. In some states, there are restrictions on how much the Solicitor or Conveyancer can charge for their services.

Among the many factors that affect the cost of the services is whether you are buying or selling a property, as this will determine how much research the Solicitor or Conveyancer will need to carry out.

The Solicitor or Conveyancer fees you pay are mainly split into two different parts to cover statutory fees and expenses. Search fees are additional costs that can include a title search, rights of way, easement inquiries, improvements, utilities, and property taxes.

Understanding the services of a Solicitor or Conveyancer and their responsibilities will help you to better appreciate how they can best support and protect you when you are ready to invest in a property. Their support and representation can give you peace of mind and ensure you complete the transaction correctly as you navigate through the process.

In Singapore, using the service of a solicitor will cost about $1800 to $4000 for a transaction. 

This includes the use of your CPF and bank loan. If without these options, you can easily negotiate with the solicitor for a better deal.