Jared Lim, co-founder of loanstreet. However, it is not compulsory for the borrower to take up this mortgage insurance from the bank. He added that more needs to be done to educate Malaysians on the importance of mortgage insurance and the different options available to them, instead of hearing it only from their banks. But how do you choose and is it really necessary if you already have life insurance? It is important to first understand the difference between the two mortgage insurances, and also your priorities.
An MLTA offers not only protection for the amount of your outstanding home loan, but also functions as savings since the amount insured will be consistent throughout the duration of the loan. To break it down for you, MRTA or MDTA is a life insurance plan with a decreasing sum assured over time, used to cover your home loan owed to the bank. The bank who approves your mortgage loan is usually the one providing MRTA; this is used as a protection for the bank in case unfortunate circumstances hinder you from paying the loan.
While Bank Negara Malaysia does not make it compulsory to buy mortgage insurance, customers who borrow money from financial institutions will find that their loan approvals are tied to a mortgage insurance policy.
On the other hand, MLTA offers an alternative for a borrower who is looking for a life insurance offering protection plus savings as well as some returns on the premium.
More commonly seen as a personal plan, you and your dependents will be financially protected when you are either no longer around, or have lost the ability to generate income.
MRTA is best to have if you are looking at a short term investment where you are planning to sell off your property within the first few years, whereas MLTA is best for those who are planning to invest in the property for the next 35 years, especially if you are co-buying with someone else.
MLTA also works well for those on a long term investment basis where it has a cash value at the end of the policy. Additionally, it is best for those who have young children or loved ones who are financially dependent on them as well. Sources: iMoney , BNM. While the Information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact on the accuracy of the Information.
The MRTA is most suitable for those who have adequate standalone life and medical insurance, and do not have many financial dependents. This type of insurance will only take care of your home loan, if it is not fully repaid in the event of TPD or death. Your family will not get a single cent from the policy in these events, as the beneficiary is the bank, not your family members.
MLTA is best for those who need an extra financial protection in the worst case scenario, as it also has a cash value at the end of the policy.
This is best for those who have many financial dependents, for example young children and a stay-at-home spouse. However, before committing to an insurance policy, it helps to do as much research as you can on the product. Whereas, MLTA can be transferred, making it ideal for investment properties. It is important to take into consideration that you will be able to pay the premiums for an MLTA policy throughout the duration of the loan.
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