Knowing About MRTA - Mortgage Reducing Term Assurance

 If you are buying a home or applying for a housing loan, then you should have to know what is MRTA. MRTA stands for Mortgage Reducing Term Assurance. Some people also call it Mortgage Life Insurance. The main purpose of MRTA is it will help you to settle your housing loan if any mishap falling on you.

Even though it is taboo and a lot of people just do not wish to talk about it, we still nevertheless need to treat MRTA seriously since illness, disability, or death can just happen any time in our life. With MRTA, it is going to cover the outstanding part of your housing loan if something happens to you. MRTA also offers you a secure feeling and safeguards your family from the loss of a house. It gives you coverage even while in the development phase. The premium for the coverage is affordable and can also be financed by your financial institution.

What benefits you can get from MRTA?

- Worldwide and 24 hours coverage.

- One-time payment to your housing loan in the event of fatality or complete and permanent disability as a result of natural factors, accidents, or illness.

- Lower cost on the premium for joint life application if the house that you bought is jointly possessed by your spouse or next of kin.

- The premiums for MRTA could be loaned by the financial institution.

Exactly what does MRTA insure?

The MRTA covers illness, disability, or death. Nevertheless, there are exclusions which include:

- Death as a result of AIDS/HIV and suicide.

- Pre-existing disorders for example AIDS/HIV

- Total or permanent disability because of armed forces, self-inflicted injuries, civil commotion, and riot, flying racing on a horse or wheels, other than as a fare-paying passenger.

How much will the MRTA premium cost?

The cost for the premium depends on the amount assured, term, joint-life, premium financing, interest rate, age at next birthday, and construction period.

If your age is the range of 18 to 60 years and is in good health condition, you are most likely to insure for MRTA. An individual can apply for MRTA by simply filling up the application form at the appointed financial institution.

Pros for MRTA :
- Those who have a financial problem can apply for it. It is subject to a maximum of 5% extra financing and earning stability.

- Rather inexpensive

Cons for MRTA :
- The rate for premium financing is 9% that is not based on the home loan rate.

- Not flexible since it is Non-Transferable to other loans, property, or refinancing to the different banks..

- The beneficiary is the financial institution. Generally, banks will keep the coverage policy but not you. Many have already forgotten about the policy by the time they want to redeem their properties.

- When your age increases, the premium rate for your next MRTA policy will get increase as well when you buy the additional property or refinancing your existing house.

- Lesser coverage for you if you pay the premium faster.

- Not entitle for income tax deduction since there is no receipt for the financing.

- Coverage on start upon the first drawdown. You are only getting covered once a claim was made to the bank even though you have signed the loan agreement and offer letter. You need to ensure nothing is going to happen to you before they release the money. Some building projects that are under development can take up to 6 months or more before your first loan get the release.

MRTA Important Note:

- MRTA is a Term Life policy that covering you up to 65 years old only.
- Its plan is non-transferable.
- It is not a lifetime plan.
- Every time you change a property or shift your housing loan, the premium for your MRTA will be raised.

MRTA vs MLTA

Besides MRTA, you may want to know about MLTA as well which is stand for Mortgage Level Term Assurance. The traits of MLTA are:

1. It carries the same coverage as MRTA however the coverage will be level rather than reducing.
2. Only some banks are offering the plan of MLTA.
3. The premium will be more expensive compare to MRTA.

Claiming sample:

For housing loan of RM100,000 for a repayment tenure of 30 years. Let's say in 15 years the O/S is RM80,000:

MRTA pay RM80,000 to the respective bank to settle off the loan balance.
MLTA pays RM80,000 to the respective bank and on top of RM80,000 to the beneficiary.