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

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.

Table of contents

• MRTA vs MLTA: What is the difference?
• MRTA vs MLTA: Which do I need?
• MRTA vs MLTA : How much will I pay?
• Sending money abroad? Save with Wise💡
• Summary✍️

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.

	MRTA	MLTA
Payout amount	Payout reduces over time according to the outstanding loan amount	Payout fixed throughout
Payout beneficiary	Mortgage lender	Any nominated beneficiary
Policy costs	Low	High
Financing arrangement	Lump sum	Periodic payments throughout term
Transfer options	Policy can not be transferred if you move home	Policy can be transferred if you move home
End value	Policy has no cash value once mortgage is fully repaid	Policy owner will get premiums back once loan is repaid, assuming no payout required
May suit	People without dependents, or who have existing life insurance arrangements in place	People 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:

• Hong Leon Bank MRTA and MLTA jargon buster
• Maybank MRTA product information
• CIMB details on MRTA and MLTA
• Mortgage decreasing term assurance from Public Bank
• RHB Bank home loan and protection information

Sending money internationally? Wise could help you save

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

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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.