Mortgage Insurance: MRTA vs MLTA
Key points
- What is MRTA and MLTA?
- How much will I need to pay for the mortgage insurance?
- Is it essential for me to purchase mortgage insurance?
- How to apply for these mortgage insurance?
Making a huge decision before and after investing in your house is necessary because it is considered a serious investment and the risks associated with housing may surprise you. The purpose of MRTA and MLTA insurance is to safeguard your family in the event that something were to happen to you in the future.
Mortgage life insurance policies are a way to ensure that your loved ones are taken care of financially if something happens to you and you are unable to continue making mortgage payments. There are two different types of mortgage life insurance policies in Malaysia: Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA).
MRTA is designed to pay off your mortgage in the event of your death, while MLTA is designed to provide a steady stream of income for your loved ones until the mortgage is paid off. Whichever policy you choose, it can help ease the financial strain on your family if something happens to you.
In this article, we will dig deeper into mortgage reducing term assurance (MRTA) and mortgage level term assurance (MLTA), discussing how they’re the best options for you in order to plan for the future, especially for your family.
What is MRTA and MLTA?
Mortgage Reducing Term Assurance (MRTA) is a type of life insurance that can be used to cover your outstanding mortgage debt in the event that you pass away or become totally and permanently disabled. It has a decreasing sum assured over time. Simply put, if you take up this mortgage and you pass away or become disabled, the insurance will pay a sum based on the balance still owed to the bank. Your family’s financial burden of having to pay the outstanding debt on the house will be lessened.
Additionally, the policy will lose value once the loan is paid off if all goes according to plan and you pay off your mortgage as per the terms agreed upon.
Mortgage Level Term Assurance (MLTA) is a little different because the payout is applied to the outstanding house loan and the amount assured remains consistent throughout time. In contrast to MRTA, where the lender itself is the beneficiary, your beneficiary will also receive the cash value. Because MLTA is a form of regular life insurance, the premium you must pay on a regular basis is not deductible from your mortgage. Therefore, it’s crucial that you comprehend the MLTA terms and conditions before making a choice.
We have prepared a comparison between these two mortgage insurance policies:
| MRTA | MLTA | |
|---|---|---|
| For protection purposes | Purpose | For protection, savings, and/or cash value purposes |
| To the mortgage lender | Payout Beneficiary | To any nominated beneficiary |
| The premium is lower | Premium | The premium is higher |
| You will need to pay a lump sum either in cash or financed into a housing loan | Financing agreement | You can have the option to pay periodic payments throughout the term |
| MRTA will not have cash value because it will reduce the cash value until the end of your loan tenure | Cash Value | Unlike MRTA, MLTA has a fixed cash value (guaranteed) throughout the loan tenure |
| No | Transferability | Yes |
| Bank will act as the beneficiary | Nomination | Anyone that you choose can be the beneficiary |
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How much will I need to pay for the mortgage insurance?
Your age, any health issues you may have, the size of the loan you are taking out, and the length of the mortgage term you have chosen are just a few of the factors that will affect how much you will have to pay. Not only that, as your age keep increasing, you will have to pay a higher premium, higher loan amount, and even more if you have any pre-existing health conditions. Your premium will be greater because there is a potential that you won’t be able to make the required payments if all these elements pose a risk during the loan’s term. To reduce the risk, the bank typically assesses a greater premium to you.
Mortgage insurance under the MRTA typically costs less than MLTA due to the reduced value they provide. However, as each insurance company has a different method for calculating and customizing the quotations according to your needs, you can speak with their representatives if you have any questions regarding the actual cost of MRTA and MLTA before making any decisions.
The following companies provide MRTA and MLTA mortgage insurance:
And a lot of other companies also provide this kind of mortgage insurance.
Is it essential for me to purchase mortgage insurance?
Well, which one is essential is based on your decision making, especially for your future. As far as we are aware, MRTA and MLTA mortgage insurance is entirely up to your lender; you are not required to purchase it. When you apply for a house loan, you can be asked to take it by some lenders. Banks typically demand that you buy MRTA mortgage insurance. To find the one that best suits your needs and your budget, perform extensive study on these product before making the final decision.
In the best case scenario, you would have completely repaid the house debt before anything happened to you. But as we all know, life rarely goes as planned. We can make plans for the things we want in our lives, but we can’t always be sure that those plans will turn out the way we want them to be.
The benefit of this mortgage insurance is that it will not only cover your home in the case of your passing or total disability, but it will also provide you peace of mind knowing that your family won’t have to take on a heavy financial load. The payment will be sent directly to your lender to cover the remaining balance of your mortgage and guarantee that your family will be taken care of in the event that something were to happen to you.
How to apply for these mortgage insurance?
The bank will typically offer you both MRTA and MLTA mortgage insurance when you apply for a house loan. Although it is not necessary, you should still think about purchasing this insurance for your beloved family. No one of us wants to leave behind a big financial burden for our loved ones, right?
Therefore, before selecting a provider, it is advised that you do some research on this mortgage insurance with various companies. Depending on your demands, different suppliers may offer varying perks and prices. Do your research and pick the option that is best for you. Take your time, and do not rush!
Verdict
Getting insurance is essential for both you and your loved ones. The greatest option for protecting your family and your home while you are gone is to get an MRTA or MLTA. As a result, your home will be secure and the stress on your family will be lessened because you will know that the mortgage insurance you purchase will cover the remaining balance of your home.
No matter which one, MRTA or MLTA mortgage insurance, careful planning based on your unique circumstances, your long-term goals, and the property you are purchasing is crucial. Everything you do today will affect how you and your family will live in the future.
Related: The Differences of Mortgage Insurance and Life Insurance | What is Home Insurance? Should I Get It?
