Is Your Family Home Protected? The story of the Borrower, A Housing Loan and the Mortgage Reducing Term Assurance (“MRTA”).

In recent times, there have been cases where executors / administrators and beneficiaries of an Estate were dismayed to face recovery of the outstanding housing loans from banks against the deceased’s Estate. The deceased’s beneficiaries were under the impression that upon the borrower’s passing, the deceased’s housing loans would be covered by the deceased’s MRTA. The deceased’s Estate accordingly sued the banks.


It was later discovered that the deceased’s MRTA application had not been approved / finalised prior to his death notwithstanding that the banks had proceeded to release the loan facilities. In these cases, the insurance provider had requested further documents from the deceased which the deceased had failed to provide. 


According to the terms of the loan agreements, the deceased was only required to submit the documents for the MRTA and the bank was at liberty to release the loan facility upon the completion of the documentation regardless of whether the MRTA was duly approved / finalized.


In these cases, the bank had filed a counterclaim for the outstanding housing loan sum against the Estate and succeeded.


Key takeaways:


  1. Borrowers should read and understand the terms of your loan agreements. Occasionally, the loan agreements may not require the borrower to take out an MRTA / Mortgage Level Term Assurance (MLTA) / other type of insurance. In such cases, the Estate would be liable to for the outstanding housing loan sum in the event of the borrower’s death.


  1. If you are taking out a MRTA / other insurance, please ensure that your application is approved / finalized and that you have fulfilled all requirements to perfect the MRTA policy. Do not assume that once the necessary documents are provided, the MRTA application has been approved.


  1. When doing Estate planning, ensure that your loved ones, particularly your executor / administrator, are aware of any large loans / claims that might be brought against the Estate. Make plans on how your Estate may address such loans / claims to lighten the burden on your loved ones in the event of your death.

Phunita Thevathesan v United Overseas Bank (Malaysia) Bhd [2020] 1 LNS 426, HC

Jayakumari a/p Jeraman v CIMB Bank Bhd & Anor [2010] 1 LNS 1972, HC


Disclaimer: The information provided herein is not intended to be taken as legal advice.

Key contacts

Goh Siu Lin

Denise Lim

Messrs Kee Sern, Siu & Huey
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51200 Kuala Lumpur


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