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Affordability Strategies: Purchasing Hawaii Real Estate as Prices and Interest Rates Increase

Affordability Strategies: Purchasing Hawaii Real Estate as Prices and Interest Rates Increase

Sep 23, 2022 | Makai Mortgage Loan Programs

For homebuyers, REALTORS®, and all those in the real estate industry, affordability has become a topic of great importance. As home values rise simultaneously with interest rates, Makai Mortgage is finding creative ways to save our clients money and continue to make home ownership in Hawaii a reality.

As a result of our diligence, Makai Mortgage is able to offer some of the lowest down payment and rate options available for ARM (Adjustable-Rate Mortgages) programs. We finance on all islands: Maui, Oahu, Hawaii (Big Island), and Kauai!

Today’s ARMs provide safeguards for the consumer that were not in place in the early 2000s – ARMs earned a bad reputation and you may be hesitant to consider an ARM as a result. But the Mortgage Reform Act now requires, by federal law, that customer risk exposure be limited, with caps set on the rate adjustment amounts and periods, and no pre-payment penalties allowed. As interest rates rise, obtaining a discounted rate by choosing an Adjustable-Rate Mortgage may be the difference between being able to afford to purchase a home or not. You would not be alone in choosing an ARM – in fact, ARM fundings are up 75% in 2022 compared to preceding years.

5 Reasons to choose a Makai Mortgage ARM

1. Lower Down Payments

For primary and second home purchases, our Jumbo ARM programs offer lower down payments than our Jumbo Fixed-Rate loans.

Minimum Down Payment %Maximum Purchase Price
10.01%*$1,078,786
20%$1,875,000
25%$2,500,000

*First-Time Home Buyers only

2. Lower Interest Rates

The initial rate on an adjustable-rate mortgage (ARM) is usually lower than most fixed-rate loans, keeping payments low for as long as 5, 7, or 10 years.

Example #1: compares monthly principal and interest (P&I) payments for a home purchase with 10.01%* down and purchase price of $1,078,786 (loan amount $970,800) between a 30 Year Fixed Rate loan and a 10 Year ARM.

Loan Details30-Year Fixed at 6.375% @ 1 pt, APR 6.505%10-Year ARM at 5.375% @ 1pt, APR 5.497%
Monthly Principal & Interest$6056.53$5436.20
Savings per Month $620.33
Savings per Year $7443.96
Savings over 1st 10 years $74439.60

*First-Time Home Buyers only
ARM Details:
Initial Cap=5%, Period Cap=1%, Lifetime Cap=5%
Adjustment Period=6 months
Index=SOFR 30 Day Avg Index (2.0076% as of 9/20/2022)
Margin=2.75%
Floor Rate=Note Rate

Example #2: compares monthly principal and interest (P&I) payments for a home purchase with 20% down and a purchase price of $1,875,000 between a 30-Year Fixed Rate loan and a 10-Year ARM.

Loan Details30-Year Fixed at 5.75% @ 1.25 pt, APR 5.877%10-Year ARM at 5.25% @ 1.25 pt, APR 5.383%
Monthly Principal & Interest$8753.59$8283.06
Savings per Month $470.53
Savings per Year $5646.36
Savings over 1st 10 years $56463.60

ARM Details:
Initial Cap=5%, Period Cap=1%, Lifetime Cap=5%
Adjustment Period=6 months
Index=SOFR 30 Day Avg Index (2.0076% as of 9/20/2022)
Margin=2.75%
Floor Rate=Note Rate

Example #3: compares monthly principal and interest (P&I) payments for a home purchase with 25% down and a purchase price of $,2666,666 between a 30-Year Fixed Rate loan and a 10-Year ARM.

Loan Details30 Year Fixed at 5.75% @ 1 pt, APR 5.858%10 Year ARM at 5.25% @ 1 pt, APR 5.355%
Monthly Principal & Interest$11671.45$11044.07
Savings per Month $627.38
Savings per Year $7528.56
Savings over 1st 10 years $75285.60

ARM Details:
Initial Cap=5%, Period Cap=1%, Lifetime Cap=5%
Adjustment Period=6 months
Index=SOFR 30 Day Avg Index (2.0076% as of 9/20/2022)
Margin=2.75%
Floor Rate=Note Rate

3. Qualify for a Higher Purchase Price

Lower interest rates result in a lower monthly mortgage payment, reducing your total debt-to-income ratios. This could increase your maximum purchase price potential!

4. Home Loan Retentions

The average life span of a 30-year mortgage is less than 10 years, and most mortgage holders pay off their loans in 10 years or less by either selling or refinancing or paying off the loan. So, chances are that you’ll be in a new mortgage before the end of the initial fixed-rate period of your new ARM!

5. Customizable Initial Fixed-Rate Options

Choose an initial fixed rate that matches your unique needs. Our most popular options include 5-Year, 7-Year, and 10-Year ARMs, allowing you to select the option that provides the most security and fits your plan. Why pay a higher price for a fixed-rate mortgage if you do not plan to own the property in less than 5, 7, or 10 years?

Look to Makai Mortgage as your answer to the challenges of an increasingly costly real estate market. We look forward to speaking with you about strategies to make your Hawaii home purchase more affordable – whether you’re on Maui, Oahu, Kauai, or the Big Island of Hawaii!

Ready to get started? Contact one of our leading mortgage originators.

*This article is for information purposes only. This is not a commitment to lend or extend credit. All loans are subject to credit approval. Certain Restrictions apply. Speak with your loan officer or see web site for offer specifics and any limitations.

Hawaii Condotel Loans with Makai Mortgage

Hawaii Condotel Loans with Makai Mortgage

Aug 30, 2022 | Condotel Loans, Makai Mortgage Loan Programs

Makai Mortgage is a leading condotel lender, with over 19 years of combined experience financing condotels. Although Makai Mortgage was established in 2019, our management closed its first condotel loan in 2003, and in 2007, began developing our long-standing lending relationships with some of the leading local banks. Since then, Makai Mortgage loan originators have made Makai a top producer of condotel loans.

How are we able to close so many Condotel Loans?
It’s all about program variety!

Portfolio Loans are traditionally the primary source of lending for condotel loans in Hawaii. These programs, offered by local banks and credit unions, are designed specifically to cater to the needs of the local market and community. Often, the guidelines for these loans can be a bit stringent.

Non-QM and Alt-Doc Loan Programs for Condotel Properties

Lately, we’ve been hearing a lot about “Non-Qualified Mortgage” (Non-QM) and “Alternative Documentation” loan programs – and for good reason! These newer-to-the-market programs make the purchase of condotel properties available to a wider range of borrowers.

Traditional underwriting requires extensive documentation from the borrower – tax returns, pay stubs, bank statements, and so on – and is subject to “agency” standards such as Fannie Mae (FNMA) and Freddie Mac (FHLMC). Agencies have strict and generally inflexible guidelines that usually do not allow for exceptions. On top of that, the guidelines limit lending to specific property types. When a property type or limited financial documentation availability poses a problem, the Non-QM and Alt-Doc loan programs can be a real boon!

Since these loans aren’t sold to the agencies, there is more flexibility in the property types that the loans finance – like condotels! They also use “alternative” methods of documentation to qualify a borrower for non-traditional underwriting. But wait, there’s more! Proposed monthly rental income – even short-term – can be used to qualify!

Alt-Doc programs have been around since 2018, but with recent changes in the housing market, are becoming more popular as other lenders are starting to promote them. Don’t get stuck working with someone new to this type of loan! These loans require much skill and the ability to think creatively to close. The management and loan originators of Makai Mortgage have been closing Alt-Doc loans since their inception.

Bottom line? Makai Mortgage not only has a wide range of loan options but also the skill and experience to close your condotel loan! Contact us for more details and to speak with our exceptional loan officers today.