MRTA vs MLTA: mortgage protection explained
When you take a property loan in Malaysia, the bank will usually ask about loan protection: insurance (or takaful) that pays off the loan if you die or become totally and permanently disabled. The two common types are MRTA, where the cover reduces as you repay, and MLTA, where it stays level.
Here is how they differ, what happens when you refinance, and how the cover changes over your loan.
MRTA and MLTA side by side
Full name
MRTA: Mortgage Reducing Term Assurance
MLTA: Mortgage Level Term Assurance
Islamic version
MRTA: MRTT (Mortgage Reducing Term Takaful)
MLTA: MLTT (Mortgage Level Term Takaful)
Sum covered
MRTA: Falls over time, roughly in line with your loan balance
MLTA: Stays the same for the whole term
If you die or become totally and permanently disabled
MRTA: Pays the bank what you still owe (up to the cover)
MLTA: Pays the bank what you still owe; anything left over goes to your family
Premium
MRTA: Lower; usually one single premium, often added to the loan
MLTA: Higher; single or regular premiums
Refinance or sell
MRTA: Usually tied to that loan; a new loan normally needs new cover
MLTA: Usually tied to you, so it can often move to a new loan or property
Best for
MRTA: Keeping the cost of protecting the loan as low as possible
MLTA: Borrowers who may refinance, or want cover that also protects their family
How your cover changes
Illustration only. An MRTA policy follows its own assumed rate, which can differ from your loan rate, so its cover won’t match your balance exactly.
| Year | MRTA cover (reducing) | MLTA cover (level) |
|---|---|---|
| 0 | RM 500,000 | RM 500,000 |
| 5 | RM 454,038 | RM 500,000 |
| 10 | RM 397,216 | RM 500,000 |
| 15 | RM 326,967 | RM 500,000 |
| 20 | RM 240,117 | RM 500,000 |
| 25 | RM 132,745 | RM 500,000 |
| 30 | RM 0 | RM 500,000 |
Halfway through the tenure, an MRTA covers about 65% of the original loan, because early instalments are mostly interest. MLTA still covers 100%.
Before you sign
- Ask whether the bank accepts MRTA, MLTA or an existing life policy, and whether you can choose your own insurer or takaful operator.
- Compare the total cost: a premium financed into the loan accrues interest for the whole tenure.
- Check the sum assured and cover term. Cutting either lowers the premium but leaves part of the loan uncovered.
- For joint loans, check whether the cover is joint or individual and what each borrower’s share is.
- If you may refinance within a few years, ask what an MRTA refunds on early settlement, or price an MLTA that can move with you.
Packages that let you finance the cover
24 packages say on their published terms that the premium or contribution can be added to the loan.
Questions people ask
Is MRTA compulsory in Malaysia?
No law makes it compulsory, but a bank can make loan protection a condition of its offer. Many banks will accept MRTA, MLTA or an existing life policy assigned to them, so ask before you sign rather than taking the first quote.
What is the difference between MRTA and MLTA?
MRTA cover reduces as your loan is paid down and normally only settles the loan. MLTA cover stays level, so after the loan is settled any balance goes to your beneficiaries, and the policy can usually follow you to a new loan. MLTA costs more for the same starting cover.
Should I finance the MRTA premium into my loan?
Financing it means no upfront cash, but you pay interest on the premium for the whole tenure. If you can pay it upfront, compare the total cost both ways.
What happens to MRTA if I refinance?
MRTA is usually tied to the original loan, so a new bank will normally ask for new cover. Some policies refund part of an unused single premium when the loan is settled early: check your policy terms before you refinance.
What are MRTT and MLTT?
They are the takaful (Islamic) versions of MRTA and MLTA, usually paired with Islamic home financing-i. They work the same way: reducing cover for MRTT and level cover for MLTT.
Does the cover tenure have to match the loan?
No. You can choose a shorter cover term or a sum assured below the loan amount to cut the premium, but any uncovered balance would still be owed if something happens to you.
Compare property loans
General information, not insurance or financial advice. Premiums, cover and refund terms depend on the insurer or takaful operator and on your age, health and loan; read the policy and product disclosure sheet before you buy.