MLTA or MRTA, or something better?‏

When come to protecting your mortgage loan, there are normally 2 types of insurance,namely MLTA & MRTA.

MRTA = Mortgage Reducing Term Assurance (MRTA) 

1. MLTA is almost similiar to a life policy. But at the end of the cover period, I think some policies don't return anything unlike a life insurance. You will have to do your homework and check with the agent.

MLTA =  Mortgage Level Term Assurance (MLTA)
2. Choosing between MRTA or MLTA depends on your investment strategy and keeping your options open. Some banks enforce a compulsory insurance policy, so you have to get a MRTA or MLTA.

In cases where you suddenly decide to sell the property a few years later down the line, the MRTA returns very little back to you. With the MLTA, I think you can re-assign the cover to your next property investment. And the insured amount is still the same.

3. Also please note, as you get older your MRTA gets more expensive. Just a rough estimate, MRTA for coverage of $100K for a borrower aged 25 would be around $2-3K, for a borrower of age 40+ it would be in the region of $10-12K.

So if you're you're it would be cheaper to go for MRTA.

Some other consideration factors:

• if your investment is a 'game', you may want to take more risk, especially if you're young and nothing much to lose.
• if is to leave a legacy for family members - good for you take a snapshot of your networth now.
• what happens if - you're not able to earn an income, or you passed on (touch wood!)
• what would happen to said properties? who will pay for installment?
• how is tenancy rate like? 80%? 90%? 20% (you chose a wrong property). Unknown? (because you bought developer unit).
• can your family member manage the tenancy? property maintenance issue?

If is high tenancy rate, and your family member can manage the property - no need buy too high insurance/required.

There is no right/wrong answer. View all your property investments as a BIGGER picture portfolio. Overview all the risk factors. And based on the risk factors, you can quantify and decide how to shift this burden of risk to insurance - which offers best rate, flexible enough to increase/reduce in future (as your tenants help you pay off and increase your equity through the years).

With some banks (e.g. Public Bank sometimes) - they force you to take MRTA. If no other loan options, you just have to agree and take it up.

My takes:

I tell you all what I choose for all my investment properties.

1) Buy MRTA

2) Buy 50% of the bank value for 5 years or 10 years

     - Reason is after 5 years, the rental should be positive and properties value is appreciating. At least the equity is 50% of my purchased price

So we need to decide on this and put this to the loan together.

So there will be no cash outlay required.

Is there something better out there?

Have found some comparison info at the link below

http://mhartanah.files.wordpress.com/2012/09/comparison_between_mrta_and_mlta.jpg?w=547

but which actually gives the BEST dollars and cents