Ok lah.. I'll put this here for info. Heard from a friend of mine who blur blur go and buy a house and never heard of the options available for MRTA. Here goes..

Mortgage Life Insurance

Mortgage Life Insurances are designed to pay off the outstanding loan balance in the event that the borrower dies or suffers from total and permanent disability (TPD) before the loan is fully paid off.

Basically there are two types of mortgage life insurance available in the market. One type is commonly known as Mortgage Reducing or Decreasing Term Assurance (MRTA or MDTA) and the other choice is Mortgage Level Term Assurance (MLTA).

Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA)

MRTA or MDTA is a reducing term life assurance specially designed to protect a loan borrower against death or TPD (total permanent disability) due to natural or accidental causes. Some lenders will allow you to finance and add the premium to your home loan (up to a certain percentage of your loan amount).

MRTA or MDTA is a simple insurance policy and has become a common and acceptable policy taken up by the borrower whenever he takes up a mortgage loan. The premium is paid upfront in one lump sum. Some lenders will finance and add the premium to your loan. The borrower can choose the amount and tenure of the coverage and the amount of premium will be determined by these factors as well as his age and gender. Banks normally encourage the borrower to take up this policy by giving better pricing on their interest rates if the borrower signs up a MRTA or MDTA policy.

To the borrower this is relatively a hassle free, affordable and necessary policy as their mortgages are covered in the event of any unfortunate incident that may caused death or TPD.

Mortgage Level Term Assurance (MLTA)

MLTA is a slight variation from MRTA or MDTA 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.

Premium is paid on a monthly, quarterly, half yearly or yearly basis and the policy holder can choose to have a wider coverage other than death and TPD. The amount of the premium will be determined by the usual factors and the scope of additional coverage.

Comparison and Features of MDTA and MLTA

Life-MLTA
1. Transferable
This policy is transferable whenever the borrower buys a new property or refinances his loan with another bank.

Example: Transfer this policy, adjust the sum assured to match the new loan, as many times as you need.

2. Insurability is Guaranteed
You purchase only once, with the same sum assured, there is no need to prove your health condition again.

3. With Savings or Returns (Cash Value)
Premium paid will be accumulated either as savings or savings plus returns. The cash value can be used to reduce or pays off your mortgage.

MRTA
1. Not Transferable
In most cases, new MDTA policy has to be taken up whenever a borrower changes his properties or refinances his loan with another bank
Example: 5 yrs later, refinancing at the older age, for same tenure of same loan amount, the MDTA cost is higher.

2. Insurability is not Guaranteed
Most of the time every time you finance your property, you have to prove that you are healthy to purchase MDTA.

3. No Cash Value
It is an expense with zero cash value at end of the mortgage tenure.

In lament term with example :
For example : The applicant name is Ken. He's a 24 male and bought a property for 230k but he only take 100k loan.

MRTA scenario
So if he purchase RM100k for 30 years MRTA the premium will be RM2165 and the surrender value from time to time is less and less. So, if anything happen to Ken at 5th year, the benefit he get from insurance com will be RM95299 while 10th year will be RM87319. So at the end, the value will be zero at 30th year.

MLTA scenario
If he purchase same RM100k and 30 years MLTA, he needs to pay RM61 every month and gets the level protection. He can choose to pay monthly, quarterly, semi-annually or annually. If Ken is TPD and can't make a source to pay for monthly installment, the benefits he get is RM100k no matter at which year. If Accidental death it would be X 2, the benefits will be RM200k. This is consider savings and you get the level benefits no matter 1st year or 18th or 30th year. Because the surrender value is high and higher. If Ken have nothing happen at 30th year, he can get back the value he prepaid. This is the benefit you get from MLTA. And, Ken is only 24, if he buy a better property, he can bring this MLTA over to that property and extend it.

This post has been edited by suiteng: Jan 9 2009, 09:18 AM

If you have a life insurance or if you want to gao dim 1 shot, then MRTA lor..

If you don't have a life insurance, you can get MLTA. But you must fork up some to buy the rider (i.e. 36 CI).

If you want to insure yourself according to the value of the loan you took, then you take MLTA. If you want cukup cukup to cover the "remainder" of loan then MRTA is enough.

In a way, MLTA is like insurance. You take RM200k loan, you insure yourself for RM200k. And if "choi choi choi" ADD, you get double the amount.

MRTA on the other hand, e.g. you took RM200k loan. After 10 years, you have paid off until left RM80k hutang (I didn't really count, illustration purposes only). If anything happens to you, you only get RM80k.

When you buy your houses or properties. You can actually use your personal life insurance as replacement of MRTA. Just tell your Banker that you will morgage out your life insurance. In case anything happen to you yourself. The banker to claim the remainder payment on your life insurance. But there are few things you need to remember before you really use this method to save your MRTA premium.

1) Always ensure you have more than 2 life insurance on hand. One for necessary illnesses protection, second one is for add on protection (opt to have).

2) this method is good for short term properties investment. Less than 5 years investment is prefered.

3) Do not use Critical illnesses life policy to replace MRTA, what if you need this money to cure your illnesses.

Recetly I found that there is another way to save your MRTA money but at the same time u invest without affecting insurance protection. How?

Also, was wondering if anyone thought about this, if you have already purchased 2-3 properties, let's say 150k each, and you have MRTA on all of them, then effectively that's like having term insurance value of 300-450k should anything happen to you. If so, why do people buy life insurance on top of that? The premiums for life cover is much more expensive than term too... not sure if one needs to pay for all the product features when all you need is protection.

Thanks for the reply. I've heard of some plan recently..

Any idea? Nothing much in google.

This post has been edited by suiteng: Apr 9 2008, 12:28 PM

Is this property for investment or for own stay?

If own stay then MLTA lor..

Depends on what you buy. If MRTA, then the loan no need to pay. If MLTA, then the money will go to the beneficiary and the beneficiary will decide on what to do with the money.

Depends on the coverage you pay for.

E.g. 1
If loan amount = 100k for 30 years.
Borrower 1 : cover 50% = RM1101
Borrower 2 : cover 50% = RM1101

Either one TPD on first year, you will get 50% of 100k = 50k.
Either one TPD on 15th year, you will get 50% of (principle, e.g. 50k) = RM25k.

E.g. 2
If loan amount = 100k for 30 years.
Borrower 1 : cover 100% = RM2202
Borrower 2 : cover 100% = RM2202

Either one TPD, you will get 100% of 100k = 100k.
Either one TPD on 15th year, you will get 100% of (principle, e.g. 50k) = RM50k.

Estimation only, ok? But once claimed, all your debts will be paid first before any amount of $$ reach your hand (if there's any left).

The premium is an example only.

The difference is coverage, full or half or whatever you wanna choose, 80:20 also can.

If 1 ppl borrow, then buy 1 person, premium RM2202 for 100% coverage. Means if buy yourself, if anything happened to you then your beneficiary can claim. If anything happen to your beneficiary.. erm, too bad.

@bold, no such thing.

Saving interest rate package? I guess it's more towards flexi.

If you plan to pay it off early, there's no need to take an "investment" like product. Just an MRTA will do. If it was me, I wouldn't even buy MRTA if the bank permits