Why you may lose your house if you simply opt for bank MRTA?

MRTA is the abbreviation of Mortgage Reducing Term Assurance.  For those who don’t know what’s MRTA – it is a life insurance plan with decreasing sum assured over time, just to cover your home loan owed to bank.

Normally, this is what happen. After you buy a house, the mortgage officer will normally ask you to buy a hassle-free bank MRTA, single premium, and financed into the loan. You only pay a little bit extra per month, what a fantastic plan!

But are you aware that buying MRTA may not be able to directly protect your asset and your family?

If you purchase MRTA, the beneficiary is the bank. If any misfortune happens, the bank get the mortgage outstanding balance from insurance company (and now the bank is safe).

What happen to your house by now? Your house will be frozen under the estate, your assets will be utilized to pay for other liabilities, clearing income taxes (including outstanding and uncleared taxes for the past many years) and settle legal and accounting expenses. 

Your family is the LAST party to receive your assets. And in this process, your beloved family will only receive the asset if your asset value is greater than liability, otherwise your estate will be declared insolvent (bankrupt). Your family is forced to leave the house even though the insurance proceed from MRTA has already been paid out. Isn’t it unfair?

In short, bank MRTA is meant to protect the bank, you and your family are only being protected conditionally.

Then what is the solution? Buying personal MLTA. It means Mortgage Level Term Assurance.

If you purchase personal MLTA, the beneficiary is your family. In case of any misfortune happens, your family will get insurance proceed equal to the value of the house. And the most important thing is that this insurance proceed is creditor-proof and will not be frozen.

What about the house? The house will still be frozen and subject to the same estate execution process anyway.

If your asset is less than your liability, your family at least have already got the cash from insurance. They can buy a new house now.

If your asset is more than your liability, your family get both house and the cash.

Does this make sense to you?

And the other wonderful thing is that if you finish your mortgage installment earlier and wanted to change to a bigger house. Your personal MLTA is portable to your new loan.

What is your choice?

Feel free to contact me or Whatsapp me @ +60178865207 to know more about MRTA and MLTA.

Why MLTA and not MRTA?

Basically there are two types of mortgage insurance available in the market, Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance(MLTA).

MLTA is a slight variation from MRTA and offers an alternative for a borrower who is looking for a life insurance which offers protection plus savings and in some policies returns on the premium.

In a nutshell, MLTA offer level/consistent protection, allow you to buy/sell property using the same MLTA protection & offer cash back and interest comparing to MRTA.

Also please note that most of the times, it is not compulsory to buy MRTA from the bank that you get the housing loan with, if the banker tells you so, do let me know

The table below shows the difference between MRTA and MLTA:

	MRTA	MLTA
Purpose	Protection	Protection, Saving & Cash Value
Protection	Reducing Protection throughout the loan tenure.	Protection is leveled throughout the loan tenure.
Transferability	Non transferable on New Purchase or Refinance. Premium will increase while age increases.	Transferable. One MLTA can be attached to Any Loan. Transferable on New Purchase or Refinance.
Cash Value	Reducing Cash Value throughout the loan tenure. Normally is much lower than Premium, and drop to RM0 at the end of loan tenure.	Fixed Cash Value (Guaranteed) throughout the loan tenure. Policy Holder will get back the paid premium in the future.
Nomination	Beneficiary is bank	Beneficiary can be anyone.
Payment	Lump Sum Payment or financed into Mortgage Loan.	Payment Mode can be Annually, Semi Annually, Quarterly or Monthly.
Premium	Low	High
Example on premium*	One time RM1,186.34	RM607.2 monthly or RM7,286.4 yearly or RM218,592 throughout the tenure
Example if there is no death or TPD*	At the end of tenure owner will received RM0	At the end of tenure, owner will received RM218,592
Example if there is death or TPD**	Insurance company will pay the loan balance of RM372k to the bank & beneficiary will received the home.	Insurance company will pay the loan balance of RM372k to the bank & beneficiary will received the home plus RM100k cash.
	MRTA’s Disadvantages Protection decreases annually Floating BLR rate = may cause unsufficienty coverage & need continuous housing loan No Cash Value Not Transferable To A New Property Can’t Help You Save on Loan Interest & Shorten Loan Tenure	MLTA’s Advantages Level Term Protection Guaranteed Cash Value Transferable To A New Property Help You Save on Loan Interest & Shorten Loan Tenure

Do call /SMS or Whatsapp me @ +60178865207 to know more about MLTA!