Do I need MORTAGE INSURANCE ?
MILESTONE 3: BUYING YOUR FIRST HOME
MORTGAGE INSURANCE: Unnecessary cost?
Some additional information:
Buying a house is probably the largest investment you will ever make in your life. Mortgage insurance may seem to be an unnecessary cost to many home buyers. However many home buyers just simply ignore how this little cost can help to secure a “HOME” for their love one if any unforeseen happened.
So What Is It?
Technically, Mortgage Insurance is to provide coverage and protection for borrowers who take up mortgage loans. It covers the borrowers against Death and Total Permanent Disability (TPD) due to Natural or Accidental causes or Critical Illnesses on the outstanding mortgage loan.
Do I Need it?
Obviously, mortgage protection insurance is a waste of money if you own your home outright. However, if you are taking a mortgage loan it is advisable to have yourself insured to prevent serious financial liability from falling on your family should something happen on you such as death, total permanent disability or critical illness. With mortgage insurance, you will be able rest assured that your ongoing loan repayments will not financially “burden” your loved ones.
MRTA vs Mortgage Saving Account ?
Commonly two types of mortgage life insurance are available in the market.
1. Term insurance come in the form of Mortgage Reducing Term Assurance (MRTA) or Mortgage Level Term Assurance (MLTA).
2. Mortgage Saving account
The table explained the differences.
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MRTA
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Mortgage Save
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Purpose
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Loan cancellation.
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Loan cancellation & savings.
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Protection
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Protection value is reduced.
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Protection is leveled or value is higher and increase interest.
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Transferability
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Non-transferable either new purchases or refinance.
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Transferable and can be attached to any loan either new purchases or refinance.
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Cash Value
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Drop to RM0 at the end of loan tenure.
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Fixed Cash Value (Guaranteed) or increasing throughout the loan tenure.
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Nomination
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Beneficiary is bank
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Beneficiary is loved ones.
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Payment
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Lump Sum Payment or financed into Mortgage Loan.
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Payment Mode can be Annually, Semi Annually, Quarterly or Monthly.
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Premium
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For new protection, premium will increase according to age.
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Age is locked at current age.
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Payment Method
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Cheque or Cash only.
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Cash, cheque or credit card.
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If there is no death or TPD*
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At the end of tenure owner will received RM0.
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At the end of tenure, owner will received the cash surrender values.
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If death or TPD* happened
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Insurance company will pay the loan outstanding balance to the bank & beneficiary will received the property.
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Insurance company will pay the money to beneficiary. The beneficiary can either choose to settle the loan or continue installment of the property.
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If there is Critical Illnesses strike
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Usually not included. Owner continues the loan repayments.
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Optional coverage. If purchased, Insurance company pay the money to the borrower. The borrower either can settle the loan or continue as installments.
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Notes: TPD* – Total Permanent Disability
“What insurance is doing?
Nothing but makes your dreams true in which you have uncertainty.”
