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Monday, May 26, 2014

MRTA or MLTA?



There are a lot of people who are not aware on the existence of MRTA and MLTA. Basically, when you buy a home, it is encouraged that you get yourself the mortgage insurance of either Mortgage Reducing Term Assurance (MRTA) or Mortgage Level Term Assurance (MLTA). 

Protect your home....
Buying a Home is always a great thing. It's always great to buy a Home for your loved ones as well but it's a purchase that takes a huge commitment and takes up to 35 years to settle the purchase. Providing a home for your dependent is a good thing, but if the home loan is not settled in full, it can turn into a burden for your loved ones in the event of death or total permanent disability (TPD).

It is with these unfortunate circumstances in mind that most mortgage officers offer mortgage life insurance policy to home buyers. In the event of death or TPD, the policy frees the borrower’s dependents from any debt as it is designed to pay off the remaining debt on repayment mortgages.


Some people feel that MRTA is better while others prefer MLTA. What say you?

MLTA is a slight variation of MRTA and offers the borrower an addition to the life coverage....savings and in some policies, there might even be returns on the premium. In short, MLTA appears to be much better, offering both protection and cash back plus interest comparing to MRTA. 

Here is a summary of the difference between MRTA and MLTA. 

MRTA and MLTA
There are those who felt that MLTA is a much better option given the possible return from it. However, I think it's not so much of a better option but more on suitability. Which one is more suitable for you?

Personally, I would prefer the MRTA. For a property of about RM500k, the premium that I paid for the MRTA is about RM11k at one lump sum while if I were to buy the MLTA, there is a commitment of RM4000 annually for 30 years. While there is a certain cash back with MLTA, I always believe that insurance should just be insurance. For protection. An overvalued protection is equivalent to a waste of money, as there is so many other investment tools that one could utilize. (Of course, this is because I'm actively investing in other investment tools that rake in better return in my point of view).

Understanding what you are purchasing is important. So, when it's your turn to buy a property, make sure to understand both the MRTA and MLTA and then only decide which one is more suitable for you.



1 comment:

  1. Thanks for posting this. I've always wanted to find the distinction between MLTA and MRTA... This article http://www.imoney.my/articles/mrta/ only explains on MRTA but it's pretty updated.

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