Having an insurance plan is no longer a foreign thing in personal financial management. You may have various insurances to cover your vehicle, or even life insurance if something untoward happens to you in the future. Like life insurance, property insurance is also something you need! This is to avoid anything unwanted. Many people say that buying a house is the biggest investment and commitment in life. This is because the payment of the house debt will take up to 35 years to complete.
So, you as a buyer need to protect this investment so that all payments can be made in the event of death or any other unexpected event. Like it or not, you need to know the meaning and difference between MRTA vs MLTA. There are two types of insurance offered for housing loans – Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA).
MRTA – A life insurance plan whose cover value will decrease over time. Used to pay housing loan arrears in the event of death or permanent disability. The purpose of the buyer purchasing an MRTA policy is as financial protection against the unpaid balance of the loan in the event of total permanent disability or Total Permanent Disable (TPD) or death. In the event of an incident like this, the MRTA policy purchased together with the housing loan made, will pay the outstanding loan balance because the borrower has lost the ability to pay. MRTA costs depend on several factors such as age, housing loan value and housing loan term you. Cover is paid in one lump sum at the beginning of the policy’s initial period.
MLTA – is another type of mortgage guarantee. The main difference is that it offers more than just paying off the outstanding mortgage balance. MLTA also helps you ensure that your loved ones receive cash payments. This is often seen as an alternative to life insurance as it offers both protection as well as cash benefits. Although BNM does not require the purchase of this insurance, customers who borrow from the bank must know that loan approval also depends on whether they take out a housing loan insurance policy or not. Like any other life insurance policy, you have to pay a fixed amount of premium for a home loan policy.
MRTA is suitable for individuals who only want to buy a house where the payment for the protection will be included once in the loan thus simplifying the insurance payment process. MLTA is seen as suitable for individuals who want to invest by buying more than one house or individuals who want to buy a house but want to enjoy other benefits such as investment and cash returns.
For example, if you buy a house with your spouse, and each person pays 50% of the monthly repayment, in the event of death or loss of opinion, the financial status of the spouse will definitely be affected. Home loan insurance provides relief that you won’t lose the home even if your spouse can no longer pay the loan.
Tips For Home Owners:
1. Don’t fall prey to real estate agents who try to put MRTA in a housing loan package without informing you of their interest rate requirements.
2. Find out if legal loan fees and assessment fees are also covered in your home loan package.
3. If you plan to sell the property within a few years, do not buy MLTA but if you intend to keep it for a long time or buy together with others, it is better if you buy MLTA.
Each insurance policy has its own advantages and disadvantages. The selection depends on self-interest without any coercion and according to each individual’s financial goals. There is no right or wrong choice because you know best what you need. Most importantly, make sure you and your property are always adequately protected!