Hana purchases a leasehold condominium unit in Waikiki. The remaining lease term is 28 years. Her lender informs her that conventional financing is unavailable for the property. Which of the following best explains why the short remaining lease term creates a financing problem in Hawaii?
Correct Answer
B) Lenders typically require that the remaining lease term extend beyond the loan term by a specified period, and a 28-year lease may be insufficient to secure a standard 30-year mortgage
Lenders in Hawaii (and nationally) typically require that the remaining lease term extend beyond the mortgage loan term by a specified buffer period (often 10 years or more). A 28-year remaining lease term is generally insufficient to secure a standard 30-year mortgage because the lease would expire before the loan is fully repaid, leaving the lender without adequate collateral. This is a practical financing challenge unique to Hawaii's significant leasehold market.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
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