Mortgage Insurance Defined
Mortgage insurance can define as borrower’s financial responsibility for his property during the loan tenure, the compensation will settle the outstanding loan amount, in the event that borrower dies or permanent disability. There are two types of mortgage insurance, the Mortgage Level Term Assurance (MLTA) and Mortgage Reducing Term Assurance (MRTA).
Mortgage Reducing Term Assurance (MRTA)
Reducing term assurance has no cash value, there is no cash back to borrower at the end of the loan tenure. Normally required to pay-off the premium in one lump sum or some cases can be financed into the mortgage loan. The premium is cheaper than Mortgage Level Term Assurance. Sum insured will reduce correspondingly with the reduce of mortgage loan amount. It will settle the outstanding balance of mortgage loan in the event of borrower dies or permanent disability.
Mortgage Level Term Assurance (MLTA)
Mortgage Level Term Assurance has cash value, its offer protection and saving, borrower will get back cash at the end of loan tenure. It is more expensive than Mortgage Reducing Term Assurance, but can pay by monthly, quarterly, half yearly or yearly. The insured amount will maintain level throughout the mortgage loan tenure, there is no reducing of insured sum in the end of the loan tenure. It will settle the balance of the mortgage loan amount in the event of borrower dies or permanent disability with cash back to beneficiary.
|Offer||Protection||Protection plus Saving|
|Protection||The Insured amount reduce correspondingly with loan amount reduce||The Insured amount level throughout loan tenure|
|Transferable||Not transferable||Can be transfer|
|Payment||One lump sum||Periodic by monthly, quarterly, half yearly or yearly|
|Premium||Cheaper||Expensive than MRTA|
|Cash value||No cash value||Obtain cash value|
|Compensation||Full settlement of home loan||Full settlement of home loan outstanding balance and obtain cash at the end of loan tenure|