Hawaii's Mortgage Mystery: How Do Locals Afford It?

Hawaii is one of the least affordable states in the US, with the highest median home value in the country. As of March 2025, the current interest rates in Hawaii are 6.69% for a 30-year fixed mortgage and 5.94% for a 15-year fixed mortgage. With such high property prices and interest rates, how do people afford mortgages in Hawaii? This is a question many people are asking, and there are several ways Hawaiians are making it work.

People save money by cutting superfluous expenses

Hawaii is among the least affordable states in the U.S. for housing, with the median home value being the highest in the country at $764,800. Hawaiians spend around 25% of their incomes on housing costs, second only to California.

To save money for a mortgage in Hawaii, people can cut superfluous expenses in the following ways:

• Cutting recurring expenses — People can save money by cutting back on recurring expenses such as streaming services, cable TV, and data storage subscriptions.
• Reducing food expenses — Eating out less and cooking at home can help reduce expenses. Making a grocery list, buying in bulk, and shopping at budget-friendly stores can also save money.
• Avoiding impulse purchases — Sticking to a shopping list and avoiding impulse purchases can help reduce unnecessary spending.
• Using public transportation — Opting for public transportation or biking instead of driving a car can help cut transportation costs.
• Using cash instead of credit cards — Studies show that people tend to be more frugal when using cash instead of credit cards. Using cash can prevent overspending and help people live within their means.
• Creating a budget — Keeping a written record of expenses and creating a budget can help individuals identify areas where they can cut back.
• Reducing debt — Credit card debt can accumulate quickly due to high-interest rates. Prioritizing debt repayment can free up money for other necessary expenses.
• Comparing mortgage rates — Shopping around and comparing mortgage rates from different lenders can help individuals save money on interest costs.

They have financial help from family

Financial help from family can significantly contribute to affording a mortgage in Hawaii. Family members can provide monetary gifts or loans to help their relatives with the down payment and closing costs associated with purchasing a home. This can be especially beneficial for first-time homebuyers, who may face challenges in saving enough for the down payment.

For example, First Hawaiian Bank offers a First Step Home Loan program with a low minimum down payment of 10.01% and a waiver of mortgage insurance. Additionally, programs like TANF and TAOF, administered by Hawaii's Department of Human Services, provide temporary welfare support for parents with children. These programs can help families in need by offering assistance with finances, nutrition, employment, and home energy.

Furthermore, family members can also contribute to an individual's financial security and confidence by encouraging a habit of saving. Developing good financial habits, such as saving towards a financial goal in your 30s, can increase the likelihood of affording a mortgage. Family members can also provide emotional support to reduce financial stress, which can have a positive impact on overall well-being and decision-making.

In addition to financial gifts, loans, and support, family members can also offer practical help. For instance, they can assist in finding and evaluating properties, especially if they have experience in real estate or are familiar with the Hawaiian market. Family members with financial expertise can also advise on mortgage options, interest rates, and tax deductions, ensuring their relatives make informed decisions when taking out a loan.

Lastly, family support can extend beyond the initial purchase of a home. For example, in the event of natural disasters like tsunamis, hurricanes, or wildfires, family members can provide emergency funds to cover home repairs. This type of assistance can help homeowners maintain their properties and avoid financial strain due to unexpected events. Overall, financial and practical help from family can play a crucial role in affording and maintaining a mortgage in Hawaii.

They've built wealth and credit outside of Hawaii

Hawaii is among the least affordable states in the U.S. to buy a home, with the median home value being the highest in the country at $764,800. The state's desirability has led to high real estate prices, and foreign and 'mainland' buyers comprise over a quarter of all home buyers.

Some people who own property in Hawaii have built wealth and credit outside of the state. For example, the Fukunaga family, who founded Servco in 1919, have since founded or acquired 40 businesses, including companies selling appliances, musical instruments, financial services, plants, office equipment, insurance, electronics, and marine supplies. The family also has business interests in Guam. Another example is the Hata family, who, through their company Y. Hata, became the dominant food distributor in the Hawaiian Islands by the 1970s.

Other Hawaiian property owners have made their wealth in the tech industry. For instance, Marc Benioff, the founder, chairman, and CEO of Salesforce, bought a home on the Big Island in 2000. Similarly, Peter Thiel, the co-founder of PayPal and early investor in Facebook, bought an oceanfront mansion in Makena in 2011.

Some Hawaiian property owners have built their wealth in other industries. For example, Russell Hata, through his company Y. Hata, acquired Maui Dry Goods, started a partnership with Kikkoman Shoyu called Japan Foods Hawaii, and acquired Val's Supermarket, changing its name to P & P Grocery Store.

Additionally, some Hawaiian property owners have diversified their portfolios by investing in multiple industries. For example, Mark Fukunaga, the CEO of Servco, has stated that the company's third main business is venture capital, which requires observing global trends.

Overall, while Hawaiian real estate is highly desirable and expensive, some individuals have been able to afford mortgages by building wealth and credit through diverse business ventures, both within and outside of Hawaii.

They have a high-paying job

Hawaii is among the least affordable states in the U.S. for mortgages, with the highest median home value in the country. For this reason, many Hawaiians need to have a high-paying job to afford mortgage payments.

One of the ways Hawaiians can afford mortgage payments is by working in finance. A finance services director is one of the highest-paid jobs in the state, and some companies offer a Cost of Living (COL) bonus. However, some companies are looking for cheaper employees and may pay lower salaries than on the mainland. Another way to get a high-paying job is to work in tech. Some people with high-paying tech jobs are able to live in Hawaii but work remotely for mainland companies, thus avoiding the ""paradise tax" that brings salaries down.

Other high-paying jobs in Hawaii include psychologists, truck drivers, and independent couriers. However, it is worth noting that salaries in Hawaii often do not match the high cost of living, and some people may need to take on side jobs to make extra money.

Before applying for a mortgage in Hawaii, it is important to check your finances and improve your standing if needed. This includes pulling your credit score and credit reports, which you are entitled to for free from each of the three main reporting bureaus (Experian, Equifax, and TransUnion). You should also use a mortgage calculator to get an idea of how much you can afford and shop around for the best mortgage deal. Hawaii also has some of the lowest property tax rates in the nation, so this is something to keep in mind when considering your finances.

They have a household with two incomes

Households with two incomes are better positioned to afford a mortgage in Hawaii, a state with some of the most unaffordable housing in the nation. The median home value in Hawaii is $764,800, the highest in the U.S. The site estimates that an income of $153,520 is needed to afford the average home in Hawaii, which equates to two earners making $76,760 each per year.

In addition to the mortgage, there are other financial considerations to keep in mind, such as upfront costs and monthly expenses. It is recommended that your total monthly spend for your monthly payment and other debts should not exceed 36% of your monthly income. This includes property taxes, homeowners' insurance, and HOA fees. In Hawaii, closing costs typically include an escrow fee, title insurance, lender title insurance, a lender fee, points on a loan (each point is 1% of the purchase price), appraisal fees, closing reserve, taxes, maintenance fee, HOA transfer fee, and other fees.

To get the best mortgage loan, it is important to shop around and know how much you can afford. There are different types of mortgages to choose from, such as fixed-rate, adjustable-rate, government-insured, and conventional. It is also recommended to get pre-approved for a mortgage before shopping for a home in Hawaii. This will give buyers an idea of monthly payments, down payment requirements, and loan program terms.

For those with low or moderate incomes, there are programs available to help with affording a home in Hawaii. The Hawaii Housing Finance & Development Corporation (HHFDC) offers mortgage credit certificates that reduce the amount of federal income tax paid, as well as loan programs for qualified first-time homebuyers. The Hawaii HomeOwnership Center, a nonprofit organization, provides education, information, and support for first-time homebuyers, including down payment assistance loans and homeownership coaching. Additionally, Hawaii has property eligible for USDA-backed loans, which may be an option for those with low or moderate incomes.

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