MRTA vs MLTA: Which mortgage life insurance should you get?

Yumiko Kijima

Buying a home is a big decision - and for most people, a long-term commitment. If you’re taking out a mortgage to pay for the property you may well need to service the mortgage loan for the next 25, 30 or even 35 years.

This guide covers both MRTA and MLTA options including features, benefits and costs. We’ll also briefly touch on how you can save money with Wise, a 3x cheaper way to send, spend and withdraw money internationally compared to Malaysian banks and provider.

wise-card-landed-malaysia

Table of contents

Wise: Send money with the real rate💡

MRTA vs MLTA: What is the difference?

Let’s start with the basics. Many people get Mortgage Reducing Term Assurance (MRTA) or Mortgage Level Term Assurance (MLTA) to offer peace of mind and protect their investment when buying a home. Both options are a form of insurance which will ensure the mortgage will still be paid even if the buyer suffers disability or death. That means that even if you have an accident or pass on, your dependents will have a place to live.

However, the ways MRTA and MLTA work are quite different.

If you’re unable to repay your mortgage due to disability or death, an MRTA policy will pay out an amount which reduces over time to reflect the fact that the amount of capital owed for the property will also reduce over time. That means the MRTA payout would cover the remaining costs of the mortgage, and assure your family of a place to live even if you were to die. If all goes well, and you pay off your mortgage in full over its term as planned, the policy ceases to have any value once the loan is fully repaid.

An MLTA on the other hand, is a broader form of insurance which pays out a fixed sum in the case of disability or death, regardless of how much is still owed on the property. As well as being paid if the policy owner suffers disability or death this payout is also available once the loan is fully repaid. Because the return on this policy type is so much more generous than an MRTA, this sort of policy also costs much more - on average around 10x the amount of an MRTA.

MRTA vs MLTA: Which do I need?

In many cases, your mortgage offer will require you to take out an MRTA policy (which is also sometimes referred to as Mortgage Decreasing Term Assurance - MDTA) with the lender. MLTA policies are commonly offered through independent brokers as opposed to your regular bank.

The type of policy that works for you depends on your budget, your age, your family situation, the size and tenure of the loan, and how you view risk. Here are a few key differences to consider when weighing your options.

MRTAMLTA
Payout amountPayout reduces over time according to the outstanding loan amountPayout fixed throughout
Payout beneficiaryMortgage lenderAny nominated beneficiary
Policy costsLowHigh
Financing arrangementLump sumPeriodic payments throughout term
Transfer optionsPolicy can not be transferred if you move homePolicy can be transferred if you move home
End valuePolicy has no cash value once mortgage is fully repaidPolicy owner will get premiums back once loan is repaid, assuming no payout required
May suitPeople without dependents, or who have existing life insurance arrangements in placePeople with more dependents, who can afford the higher premiums

Take independent financial advice if you’re unsure which policy type will work best for you - and remember to compare the options carefully so you get exactly what you need.

MRTA vs MLTA : How much will I pay?

The costs of both MRTA and MLTA assurance will depend on a range of factors including:

  • Your age
  • Any health problems you may have
  • The amount of loan you’re taking out
  • The mortgage term you’ve agreed

In broad terms, you’ll face a higher premium if you’re older, taking out a higher loan amount, or if you have any pre-existing health conditions. That’s because unfortunately, in these circumstances, there’s a greater risk of you suffering problems during the term of the loan and being unable to complete payments. Banks and brokers therefore charge a higher premium to mitigate the risk.

The costs of MRTA will always be lower than the premiums for an MLTA policy, because the cover offered is of a lower value.

However, each bank or insurance provider has their own policy on how to calculate the costs of both MRTA and MLTA, and quotes are tailored to the individual situation you’re in. That means that the best way to find out more about the costs of mortgage insurance is to call or visit your chosen mortgage provider, or talk to a specialist insurance broker to get some quotes for comparison. Different policies will have varied levels of protection - and differing fees to consider, so shopping around to get the best deal for your situation makes sense.

Here are a few resources to help you get started:

Sending money internationally? Wise could help you save

An independent research found that it is on average 3x cheaper to send, spend, and withdraw money overseas with Wise compared to 6 other provider and Malaysia bank accounts.

If you’re buying a home in Malaysia from abroad, Wise may cut the costs of sending and receiving international payments.

Whether you’re transferring money from overseas to pay a deposit, covering legal fees, or arranging your mortgage insurance with an international payment, Wise can help. You’ll find low, upfront transfer fees, a fast and secure service - and the real mid-market exchange rate every time.

With Wise account, you can;

  • Send money to 80+ countries
  • Receive money for free in 10 currencies (inlcuding USD & SGD)
  • Hold and convert 50+ currencies in 1 single account
  • Spend in foreign currencies with super-low conversion fees

No monthly charges or minimum balances required😉

Join 11 million people who use Wise and save 1 billion GBP (=5.6 billion MYR) a year compared to using a bank.

Get your Wise card for free till 1 Jan 2022, limited to first 5,000.

Sign up for free🚀


Summary

Taking out insurance can bring real peace of mind, and make sure you and your loved ones are protected if the worst should happen. The exact type of mortgage insurance that suits your needs will depend on many factors including your personal situation, your future plans and the property you’re buying.

For some people, choosing an MRTA means that the immediate costs are lower - but they know their loved ones will be able to settle the mortgage in full no matter what. For others, an MLTA policy - while more expensive - is the best option, as a comprehensive insurance and savings plan which can support the family in future.

No matter which works for you, don’t forget that you can also cut your costs with Wise if you’re sending or receiving international payments. See if you can save with Wise today.


Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

Money without borders

Find out more

Tips, news and updates for your location