MRTA vs. MLTA – Which One Is The Best Housing Loan Insurance?

Source:http://www.horlic.com/

What is MRTA / MLTA?

Basically, both Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA) are functioning as a protection for borrower by helping them to settle their outstanding mortgage loan in the event of something bad happens. In other words, it is mortgage insurance.

What are the Differences Between MRTA and MLTA?

How to Determine Buying MRTA or MLTA is The Best?

Step 1: Identify the purpose of buying the property, whether it’s for self-occupying or investment because that will determine how long you are going to hold the property.

Step 2: Analyse the best protection coverage needed, which is sufficient to ensure your spouse will not get into financial trouble for the monthly mortgage installment. In order to minimize the costs, it might not be necessary to have full coverage (same as total housing loan amount) as you might have other backups (eg. savings, cash, other insurances, shares etc).

Step 3: Do some calculation and comparison to have clearer picture on the costs involved and affordability on the premium, respectively.

Example 1: Buying MRTA

• Total Loan Amount = RM 106,155
• Loan Tenure = 30 years
• Age = 25 years old
• Coverage Ratio (%) = 100%
• Coverage Amount = RM 106,155
• MRTA Premium = RM 2,371.50

Payment Option 1: One Lump Sum Payment Upfront

• Since it is one lump sum payment upfront, hence, no interest is charged

Payment Option 2: Financed into Housing Loan

• Assume BLR – 1.8% = 4.25%
• Assume Loan Tenure = 30 years
• Monthly Installment = RM 11.66
• Total Interests Paid = RM 1,824.84
• Total Payment = RM 4,196.34

Example 2: Buying MLTA

• Total Loan Amount = RM 106,155
• Loan Tenure = 30 years
• Age = 25 years old
• Coverage Ratio (%) = 100%
• Coverage Amount = RM 106,155
• MLTA Premium = RM 74.30/month = RM 891.60/year

3 years x RM 891.60/year = RM 2,674.80
6 years x RM 891.60/year = RM 5,349.60
9 years x RM 891.60/year = RM 8,024.40
12 years x RM 891.60/year = RM 10,699.20

Example 3: Comparison Between MRTA and MLTA (Buying Properties for Investment)

Example 4: Comparison Between MRTA and MLTA (Buying Property for Own Stay)

For more comparison of MRTA charges on the varies loan amount, try this MRTA Calculator from www.fiscal-wise.com.my