A Personal Finance Blog for Malaysian: Reply to Reader: MRTA, why I don't need.

Thursday, November 11, 2010

Reply to Reader: MRTA, why I don't need.

From a reader

i read your blog about MRTA, realized that it seems to suit more 'longer-term' loan owner instead of short-term (eg. 4 to 5 years tenure).

i've bought my 1st house, signed a 10-years tenure but will redeem it @ the 5th year... i can't see the need of getting MRTA (ps. i'm 27-year-old).

pls advise & i'd be appreciated for your great sharing.
thank you
My comments (and opinions)

  1. MRTA is an expense - no doubt.
  2. It is not so much of long-term or short-term, it is about protection against risk. That is why all businesses buy insurance from year to year because one event can wipe out or seriously affecting the business and cause unemployment for hundred if not thousand of employee.
  3. MRTA serve an important purpose
    1. Bank is secured when anything happen to you;
    2. Your dependent is worry-free when anything happen to you;
    3. If that property is for own use, MRTA really makes a big different. (just imagine the lost of income or a love one and yet being chasing out from the house or force to sell it....)
  4. If you are young and have no dependent, MRTA is not necessary because:
    1. Bad case, upon death, the house will be disposed off by your beneficiary. Bank get pay for the loan, your beneficiary gets the balance.
    2. Worst case, upon total and permanent disability, the house will be disposed off, hopefully not at a big loss but still taken care by your family member (no income (but still alive) and no house)