If you have experience with Mortgage loans, you’ll most probably heard of MRTA or MLTA. But what is MRTA and MLTA? What are the differences? and Which is better?
What is MRTA & MLTA?
MRTA – Mortgage Reducing Term Assurance and MLTA – Mortgage Level Term Assurance is in fact just another life insurance coverage. The banks named it “mortgage” simply because the purpose is to cover your mortgage loans. Taking out the “mortgage: jargon, it can be any type of life insurance products available in the market.
MRTA as the name suggest, is a reducing term insurance. The sum assured reduces accordingly to ZERO at the end of the term. While for MLTA, coverage stays level throughout the cover term.
If you are getting an MRTA, get the full loan tenure term. For example, if your loan is 30 years, get a 30 year MRTA Term. Because if you get a shorter term plan, you’ll definitely get caught with some shortfall. It’s becoming worse when the term gap widens. So, it is no point for you to get a 5 year MRTA if you have a 30 year loan.
So, which is better?
It very much depends on your personal needs & situation.
- If the house is for your own stay house, you don’t plan to sell the house and want to keep it for your family, you may consider a full term MRTA.
- If it is for your own stay house, but you plan to sell the house and upgrade in the future, MLTA may be worth considering.
- If it is for your investment property, you plan to settle off the loan and leave the property rented so that your family can somehow rely on the rental when you are not around, you may consider a full term MRTA.
- If it is for your investment property, you plan to sell off the property should misfortune arise, then you may just review & top-up your existing insurance coverage to prepare a 2-3 years of reserve fund for the repayment. This is important, so that your family does not need to desperately forced sell the property at probably a lower price.
Lastly, if you would like to cover the Critical Illness events, then MLTA is your only choice.
However, it is wise to plan your protection based on your big picture. When you plan it together, you can probably strategies a protection plan with a more cost efficient way. An independent financial adviser would be able to help you with this. Provide you with unbiased advice and recommendation, help you to make a right decision for yourself.