Most people having a Mistake about MRTA

I believe most of you have seen the graph on above before, showing the major difference between MRTA and MLTA in term of the sum assured. No issue on this right?

“If the MRTA fees for 30 years is too expensive, no worry, it’s flexible, we can adjust it to 15 years or even shorter period for cheaper premium.”

Have you experienced this before? Sound familiar right?

Ok, we go straight to the point: If you have shorten the coverage period to 15 years from 30 years, how much do you think the insurance company will fork out to settle your loan if you die at 13th years (refer to green line)?

Before this, I was misunderstood that the coverage will follow the blue line, which means my total outstanding loan will be covered, as per “Y” figure.

But, I’m wrong! It actually covers a very minimum amount as what you can see from the graph, the “X” figure. The sum assured is even lower, almost nothing, if something goes ‘wrong’ with you in 15th years. You get my point?

So, what’s wrong with MRTA? Nothing wrong with it, it’s about understand the concept correctly, because buying MRTA is part of financial planning for 10 to 30 years in advance.

Transfer MRTA to another Property to Save Money for Home Insurance

Mortgage Reducing Term Assurance(MRTA) is not transferable to another property! This is what we always heard from most of the people, right? That means the initial Home Insurance – MRTA I bought has been assigned mainly for Property A only. If I buy Property B, another new MRTA is needed. Same for refinance home loan, another new MRTA is required too. Is it true?

a lot of people are not aware that MRTA is actually transferable in certain conditions. Example: You buy a MRTA for $200,000 property A, after some years, assume your outstanding home loan is $100,000. Therefore, your MRTA coverage will be reduced to $100,000 too as per your outstanding loan (That is why people call it Mortgage Reducing Term Assurance).

Let say you want to refinance home loan of Property A to buy another new Property B at $200,000, in fact you no need to buy new MRTA for $200,000 because now you may transfer the previous MRTA of Property A to your Property B. If you don’t do so by write-in to your bank/insurance company to instruct them to transfer the previous MRTA to your new property, then few thousand dollars might be wasted just like that.

There are so many banks and insurance companies in the market are offering variances of home loan packages and home insurance products like MRTA and MLTA. Terms & conditions, obligation to attach MRTA into home loan have been revising from time to time due to competitive environment among so many companies. Call them and make appointment to meet up with them to find out more details from their home insurance quotation. It helps us to save more money.