Hawaii is a beautiful place to live in because of its climate and culture. If you planning to build a house in Hawaii or to relocate to Hawaii, you need to have an idea of the different mortgages available there. It is better to educate yourself on the established mortgage situation in Hawaii before buying a home or getting a mortgage. There are two types of mortgages available in Hawaii and those are the fixed rate mortgages and the adjustable mortgage rates. The mortgage business in Hawaii is growing by leaps and bounds and this has forced the Government to introduce some new policies involving mortgage brokers. Let us go through the types of mortgage in detail.
During the time of the recession, just like any other industry, the real estate also suffered a major set back. But towards the latter half of 2009, things began to creep back to normalcy. Home buyers who had been dithering till then began to look for homes at low mortgage rates and slowly the sales began to pick up. The growth is still dreadfully slow and there have been more foreclosures than ever because of lack of employment and tight credit. The nationwide median prices rose slightly by 1.4% through the latter half of 2009. The housing prices in Hawaii are rising to the top again when compared to the nationwide prices. The Oahu market is more stable than all of the other cities in Hawaii and even the rest of America. The real estate prices are also really high because of the area’s desirability as a resort, unique history and land size. In certain places in Hawaii the land development is reasonably poor when compared to demand.
It is not wonder that real estate markets in Hawaii are picking up. Who doesn’t want to live in this charming county? The state of Hawaii is composed of seven islands of which Oahu is the most populated.
Popular cities in Hawaii are Honolulu, Kapolei, Kailua, Lihue, Kapa'a, Kahului, Kailua-Kona, Hilo and Lanai City. These places are famous for their beaches, bays, basins, craters, cliffs, arches, forests, lakes, islands, streams, ridges, slopes, summits, valleys and swamps. Since tourism reigns supreme in Hawaiian cities it is important to build good hotels, ATMs, banks, etc. for tourist convenience. Tourists can indulge in sports as well as sight seeing and sun bathing at the stunning beaches in Hawaii. Hawaii is a lovely place to retire to and mortgage will be affordable for many retirees.
Just as its name suggests, the rate of interest for this type of mortgage remains fixed throughout the loan period. The loan period varies with the type of loan taken by the client. There are 10 year fixed mortgages, 15 year, 20 year, 25 year, 30 year and so on. The major advantage of this kind of loan is that it is predictable. The monthly payment remains the same though the interest rate to be paid will be bit high compared to the adjustable mortgage type. It is not subject to market fluctuations and this makes the loan taker live without any worries. Some people prefer the security of a fixed rate mortgage when compared to the ARMs. Select this kind of mortgage if you believe that you are going to stay in that house during the entire period of loan and if your financial condition is going to be stable.
With Adjustable Mortgage Rates, you can afford a bigger mortgage. If you are planning to sell off the house in 5-6 years, you can take the ARM. Even though the client gets a lower interest rate initially the market fluctuations can drastically have an effect on the interest rate to be paid in the coming years. If the rates happen to fall, you don't have to refinance the loan to make your payments also come down. This change will bring about a corresponding change in the monthly payments too. Suppose you have an ARM for $ 150,000 that is annually adjusted. The interest rate starting at 5.75% may rise to 6%. This steady rise may bring about an interest rate of 11.75% at the end of 4 years. You would have to raise your payment by $639.00 (from $875.00 to $ 1,514.00). For example, an annually adjusted ARM for $150,000 may start at 5.75%, but a 6% cap could allow it to go to 11.75% within four years. This would raise the payment from $875.00 to $1,514.00, an increase of $639.00.
The popular ARM types are 10/1 ARM, 7/1 ARM, 5/1 ARM, 3/1 ARM. The first figure that you see represents the initial period of the loan. Your interest rate will remain the same as when you took the loan. The second figure shows the adjustment period, showing how often adjustments can be made once the initial period is over. The most common ARM used is the Fully Amortizing ARM.
The two basic types of home loans are the recourse loan and the non recourse loan. Both provide their own advantages and challenges to their creditor and debtor. In the recourse loan the creditor is allowed to come to the debtor in the event of default. Suppose the bank is your creditor, they can take action to make you pay the amount. They can even go to court against you and maybe even seize your property. The advantage that a recourse loan has over a non-recourse loan is that in the recourse loan, the monthly payment is much less. Even though it is possible to get an unsecured loan, you will have to convince the bankers of a good credit score and proof that you will indeed pay back the loan.
In Hawaii you get only non-recourse loans. With non-recourse loans, it’s an entirely different story. With this type of loan, you can default on the loan without running, scared that your creditors will come after you. The creditors usually have some collateral to support them when the loan goes into default. They can go after that particular asset and employ any decent means to get their hands on their investment. Thankfully, they cannot come and ask you for the money personally.
Non-recourse loans are the most common loan when you take a mortgage. If due to some reason you are not able to make your house payments, your mortgage will be set to default. Then comes the foreclosure process, this is when your house is put up for auction and sold. Your house will be gone, but at least they cannot go after any of your other assets and take them away from you.
Foreclosure is any debtor's nightmare. It’s a process by which the debtor loses the house to the creditor in the case of a defaulted loan. The creditor then proceeds to recover the amount by taking ownership of the property and trying to sell it on the open market. The debtor can sell off the house during the pre-closure period and pay off the loan. This move can be advantageous to the debtor's credit history because having a foreclosure is definitely a black mark. In Hawaii, the creditors use both judicial foreclosures and non-judicial foreclosures for mortgages in default and the debtors do not have the right of redemption. The time line for a judicial foreclosure is 11 months and for a non-judicial foreclosure it is six months. The out of court foreclosure or court foreclosure depends on what is written in the sales clause contained in the mortgage. The procedure of the time, place and date of sale will be followed according to the contents of the sales clause in the deed of trust.
This is a formal document that is made out by both the creditor and the debtor at the time of the real estate transaction. It contains the name of the buyer and the name of the person who sells it and the legal description of the property. This written document should be notarized. There are three types of deeds used in real estate transactions in Hawaii. Those are the Quitclaim Deed, the Grant Deed and the Warranty/Non Warranty Deeds. In the deeds, the terms Grantor and grantee are used to signify the lender and the debtor. Through the quitclaim deed, the transaction is done when the ownership interest and the title are transferred from one person to the other without any limits. There are no warranties or guarantees that the title is free of claims or liens. This is usually done in the case of divorcing couples when one party signs off to the other. In the grant deed, the ownership is transferred, but the title is retained unless specifically mentioned. In the warranty/non warranty Deed there are several other types that claim that the title is good, free of any claims or leins and is the most common form of transfer.