See Part One here: http://wp.me/p4w2B4-B
So what does leasehold land tenure mean to you who are interested in real estate in Hawaii?
1. If the lease has less than thirty-five years remaining, you will not be able to get a conventional 30 year mortgage. In addition, there are restrictions on loans and terms depending on type and size of the unit, lease terms, and any additional landowner conditions.
2. There is no guarantee that any lease will be renegotiated nor what the new lease amount will be. Some newer leases have step up amounts defined in the renegotiation process; some do not.
3. It may be cheaper up front, but more expensive in the long run as you are basically paying the landowner to build his equity not yours. If the cost of your mortgage less the tax benefits and plus the lease payments are less than what you would pay for rent, then this scenario might work for you.
My advice? If you are the average home buyer coming to Hawai‘i, don’t do it. Even buying the fee simultaneously when you purchase the home can cost you. That’s what the FA means in listings – fee available for purchase. It is two escrows and two title fees, and usually two loans all with separate fees and very tricky as involves a third party and their lawyers in the transaction.
If you’re lucky and the condo conversion law passes in the near future, you’d still have to come up with the additional funds to buy the fee. And you’re already in a new mortgage. And the mortgage market is still tight today even after the laws push for banks to loan out that bailout money. (That’s another article too.)
Solutions for you? Work with a qualified Realtor® to find fee simple property that will build equity and meet your needs. Get pre-qualified with a local lender. Local lenders understand our unique market and land laws. The can both tell you what you have to work with now and what you need to do to prepare to purchase a home in Hawai‘i. Be flexible and willing to buy smaller, hold and build equity for three to five years, and then buy up.
Written by Kate Braden Realtor® ePRO ABR SFR AHWD ©2007 – 2014
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