MRTA or MLTA (Mortgage Assurance) is the mortgage insurance to secure a property for any unforeseen circumstances happen to the home buyer. Buying a home is a huge commitment and will take the average homeowner up to 35 years to fully repay. Mortgage Assurance is very important as if the home loan is not settled in full, it can turn into a burden for your loved ones in the event of death or total permanent disability (TPD).

  1. Mortgage Reducing Term Loan

Mortgage Reducing Term Assurance (MRTA) – life insurance plan with decreasing sum assured over time, and it used just to cover your home loan owed to bank. This plan is usually offered by the bank you are getting the mortgage from, as it is used as protection for the bank in case of misfortunes that stop you from servicing the loan.

2. Mortgage Long Term Assurance (MLTA)

Mortgage Level Term Assurance (MLTA) – alternative for a borrower who is looking for a life insurance which offers protection plus savings and in some policies returns on the premium. This is a personal plan, where you and your dependents are financially protected when you are no longer around, or have lost the ability to generate income.

Summary of MRTA vs MLTA

 MRTAMLTA
CompulsoryNoNo
Price/ PremiumEconomical option for property loan borrowersHigher premium amount
Payment Method- Premium is paid up-front as a lump-sum.
- Homebuyers top up this amount to their mortgage value as most banks offer a goodie of a lower interest rate on your home loan
- Payment is made periodically either annually, quarterly or monthly
FinancingFinancingSelf-financed
Policy PurposesIn event of your death or total permanent disability (TPD), the benefits derived from this mortgage insurance will go directly to the bank to settle your outstanding loan and your family members will not receive any cash benefit from it.In the event of your death or total permanent disability (TPD), the benefits for repayment of outstanding home loan as well as a guaranteed cash value back at the end of the scheme.
TransferrableYes.
It is a common misconception that a MRTA is non-transferable from one property to another. This is a myth – all you have to do is to ‘top up’ the premium based on the new property’s value.
However, the process is a bit complicated and may consume a considerable amount of time if you intend to transfer the policy from one bank to another.
Yes.
Coverage AmountReducing term.
Coverage will gradually reduce in line with outstanding loan until it reaches zero at the end of the tenure.
- Sum assured remains constant or level throughout the policy’s tenure period
NomineeBankCan be anyone
Cash ValueNoFixed cash value
ClaimsBeneficiary get the houseBeneficiary get the house and cash value
Who suitable for the plan- Keep house for long term and no financial dependents.
- Young adult on a budget leash and own medical insurance
- Individuals who have more financial dependents as the beneficiary will receive the home and cash
- Suitable for property investors. Keep the property for short term or use it for investment. As the policy is easily tranferable.
Disadvantages- No cash value
- The MRTA’s biggest downside is that the loan settlement directly goes to the bank
- Even if the loan is settled, your house can remain frozen under the state. This is until all your income tax, legal and accounting expenses are paid.
- MRTA will be affected by fluctuations in interest rates. Increase in bank interest rates over the years has made the actual outstanding loan higher than the projected outstanding loan. Hence, giving policyholders no choice but to pay the balance.
- Higher premium amount
- Unable to finance in your loan amount
- Age plays a role in MLTA much like life insurance, the higher the age, the higher your premium will be.

Source of Image: That Life Planner

Cash Back After 30 Years

 MRTA
MLTA
Age28 28
Property ValueRM500,000RM500,000
Financing %90%90%
CoverageRM450,000RM450,000
PremiumRM16,759.00RM4,081.50 (Annually)
RM357.13 (monthly)
Total cost (30 years)RM16.759.00RM122,445.00
No claim cash back (30 years)RM0RM184,383