Understanding differences between MRTA and MLTA

There are good and bad apples in every industry. Some may not be professional enough or misleading consumers for personal gain. Buyers who are purchasing real estate may face difficulty in choosing mortgage insurance when there is inaccurate or inadequate information available.

I sort out the differences between Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA) using the chart below, allowing buyers (especially first time home buyers) to clarify the myths and ensuring consumers do not just sign on a mortgage insurance but end up purchasing a life insurance without realizing it. 

Every bank has its own regulations, some banks make it compulsory for the borrowers to buy MRTA with them. In fact, Bank Negara Malaysia has no such explicit provisions so far, but they strongly recommended that borrowers to buy an insurance as a protection for their mortgage.

MLTA is not favored by some borrowers due to its premium rates, and borrowers need to remember it is not necessary to have MLTA. On the bright side, the premium payment method for MLTA is more flexible. Policy holder can choose to pay the premium in monthly, quarterly, semi-annually or annually. The protection by MLTA can be transferred to newly purchased property and the beneficiary can be anyone.

Type of Insurance	Mortgage Reducing Term Assurance (MRTA)	Mortgage Level Term Assurance (MLTA)
Mode of Protection
Benefits	Provides protection for mortgage	Provides protection for mortgage, with savings and cash value
Payment method	Lump sum payment (By cash or put into mortgage loan)	Regular payment
Protection	Sum insured will reduce periodically	Sum insured will remain until policy is matured
Coverage	Mortgage loan	Mortgage loan, including life insurance and optional 36 critical illnesses coverage
Transferable	No	Yes
Cash value	No cash value at the end of policy	With cash value
Nomination of beneficiary	Bank only	Anyone
Premium	Lower	Higher

Both MRTA and MLTA serves as a protection for borrowers. If there is an unfortunate event, such as death or total permanent disability, insurance company will pay the balance of loan amount on behalf of insured to bank.

However, if you already have sufficient life or medical insurance coverage, MLTA might not be your choice. The difference for MLTA is that it provides more comprehensive protection. In the event of unfortunate, your family member will receive the insurance payout and use the money to pay for any needs, including the mortgage loan.

Do consult your financial planner or financial advisor if you are unsure which type of mortgage insurance is suitable to you. For enquiry, you can drop me a message here.