Hawaii Mortgage & Refinancing

Last Updated on September 17, 2020 by Andrew Lee

With its tropical climate, majestic natural landscape, and clear beaches, there’s no longer a need to wonder why Hawaii draws so many visitors, and why its current residents don’t want to leave. (Source: Livability.com)

Just to name three of the best places in the state are Waipahu, Honolulu, and Kailua. Although the cost of living here exceeds that of the national average, its impressive employment rate and quality education system make up for it. (Sperling’s Best Places)

Pricing of Homes in the State

Aloha State homes, despite fetching a median value of $589,300, still attract a lot of property investors and home buyers. (Source: Zillow)

Most of the state’s residents live in condominiums, with these properties making up 56.50% of the housing market and having an average value of $311,678.22. Accounting for 41.90% are single-family homes averaging at $689,246.54.  PUD homes are the most expensive at $829,522.39 on average. The few townhomes here fetches an average value of $520,103.10.

Loan Limits

Because prices of homes in the state are higher than the national average, loan limits are also higher. All five counties (Hawaii, Honolulu, Kalawao, Kauai, and Maul) exceed the standard conforming loan limit of $417,000, further proving the high cost of real estate here.

It’s important to note that HI classifies as a deficiency state. This means that if a mortgage-financed home is foreclosed and the homeowner still owes an amount greater than what the bank can sell it for, the lender can sue the borrower. Lenders can also claim the assets of the borrower to make up for the difference in the balance and the house’s new sale price.  

The Most Common Mortgage Types in the State

Like in almost every other state in the country, The Aloha State residents have two types of home loans to choose from, namely the fixed-rate and the adjustable-rate mortgages (ARMs).

  • Fixed-Rate Mortgages: Those who prioritize stability over lower initial rates will find this type of mortgage better suited for their needs and preference since it comes with locked-in rates. In short, the interest rate applied to the monthly payments won’t change, even if the rest of the market tumbles. Fixed-rate mortgage rates in the state average at 4.06%.
  • Adjustable-Rate Mortgage: The primary attraction to ARMs is their interest rates lower than the fixed-rate ones. Lenders charge these initial rates, also commonly referred to as “teaser rates,” for the first one to five years of the loan’s term. After this, they can already adjust the rates depending on the movement of the market (higher or lower). The average ARM rate here is 2.94%

Refinancing: When It’s a Good Idea

Existing borrowers can choose to refinance their mortgages if it’ll allow them to save a considerable amount of money on their overall loan expenditures. Refinancing comes in two types: rate-and-term and cash-out refinancing.

In most cases, homeowners go for a rate-and-term refinancing to obtain a lower interest rate offered at a term more suitable for their finances. The reduced rate is applied to the outstanding balance.

Cash-out refinancing involves taking out a new mortgage with an amount greater than what they still owe with the first loan. They then use a portion of the money they receive to pay their outstanding balance. The rest they can opt to get in cash form or repay their other debts.

Other Resources for Mortgage Applicants and Existing Borrowers

Borrowers and homeowners in the state who need assistance with mortgages can seek the help and guidance of several government entities. For instance, there is the Housing and Urban Development (HUD), which offers information about HUD-approved housing options in HI. For existing mortgage holders, a good source of aid is the Making Home Affordable Program (MHA). This federal government program can assist those who have trouble making their monthly payments or those underwater on their mortgage.


U.S. Department of Housing and Urban Development – Hawaii: http://portal.hud.gov/hudportal/HUD?src=/states/hawaii

Making Home Affordable Program: https://www.makinghomeaffordable.gov/steps/Pages/step-2-all-programs.aspx

Hawaii Housing Finance and Development Corporation: http://dbedt.hawaii.gov/hhfdc/mortgage-credit-certificate/