Hard Money Lenders Brooklyn, NY: Alternative Financing Options

Published on September 19th, 2024
10 min read

Joseph Gordon Editor
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Joseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.

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Looking to kickstart your next real estate project in Brooklyn with a hard money loan? Whether you’re eyeing a brownstone renovation in Bed-Stuy or planning to transform a Park Slope fixer-upper into a rental property, hard money lenders in Brooklyn offer a fast and flexible financing option. These loans can be a game-changer, especially for those with tight deadlines, limited capital, or credit issues.

But hard money loans aren’t just for seasoned investors. If you’re in a situation where you need to bridge the timing gap between buying and selling a home, there are alternatives that can help leverage your home’s equity.

This guide will walk you through the essentials of hard money lending in Brooklyn, helping you figure out if this financing option fits your investment goals.

Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.

What is a hard money lender?

A hard money lender is a private individual or company that provides short-term loans secured by real estate. Unlike traditional lenders that focus on a borrower’s credit history, hard money lenders in Brooklyn prioritize the property’s value. They typically work with clients like house flippers and those investing in rental properties.

Hard money lenders use the after-repair value (ARV)—the estimated value of a property after renovations—to determine loan amounts. They usually lend a percentage of the ARV to manage risk.

Interest rates on hard money loans are higher, typically between 8% to 15%, and include fees like origination costs. If a borrower fails to repay, the lender can seize the property to recover their investment.

How does a hard money loan work?

If you’re considering real estate investment in Brooklyn and need a fast, flexible financing option, hard money loans might be a good fit. Here’s a quick overview of how these loans work:

Short-term loan: Hard money loans typically have a repayment period of 6–24 months, much shorter than the standard 30-year mortgage. Some lenders may extend the term up to 36 months if needed.
Faster funding option: Unlike traditional loans that can take 30 to 50 days to process, hard money loans can be approved within days, making them ideal for quick deals.
Less focus on creditworthiness: Approval is less reliant on your credit score or income history and more on the property’s potential value.
More focus on property value: These loans use the loan-to-value ratio of the property as collateral, meaning the property’s worth is key in securing the loan.
Not traditional lenders: Hard money loans are usually provided by private individuals or companies, not traditional banks.
Loan denial option: Often used by those denied traditional mortgages but with substantial home equity, offering an alternative financing route.
Higher interest rates: Expect to pay higher interest rates due to the increased risk hard money lenders take on compared to traditional lenders.
Might require larger down payments: Borrowers may need a larger down payment, sometimes up to 20%–30%, depending on the property.
More flexibility: Hard money lenders often have flexible terms, including lenient debt-to-income requirements, offering more options than conventional loans.
Potential for interest-only payments: Some hard money loans may allow for interest-only payments initially, which can ease cash flow during the project’s early stages.

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What are hard money loans used for?

Hard money loans can be a versatile financing tool for various real estate needs. Whether you’re flipping homes or navigating complex situations like foreclosure, these loans offer quick access to capital. Here’s how they can be used in different scenarios:

Flipping a house: When flipping homes, time is crucial. Hard money loans provide fast funding, allowing investors to purchase properties quickly, complete renovations, and sell for a profit. The short-term nature of these loans aligns with the quick turnaround needed in house flipping.
Buying an investment rental property: Investors looking to purchase rental properties can use hard money loans to secure deals quickly, especially in competitive markets. These loans offer flexibility and speed, enabling investors to purchase, renovate, and rent out properties while building equity.
Purchasing commercial real estate: Hard money loans can also be used for commercial real estate acquisitions. Investors can benefit from the quick approval process to seize opportunities in the market, whether it’s buying office spaces, retail stores, or industrial properties, where traditional financing might take too long.
Borrowers who can’t qualify for traditional loans: Hard money loans are an option for borrowers who don’t meet conventional lending criteria, such as those with lower home equity or non-standard income sources. These loans focus on the property’s value rather than the borrower’s credit score or income history.
Homeowners facing foreclosure: For those at risk of foreclosure, a hard money loan can provide a lifeline by offering fast funding to pay off debts or refinance. This immediate financial relief can help homeowners avoid foreclosure and buy them time to sell or stabilize their financial situation.

How much do hard money loans cost?

Hard money loans generally cost more than traditional loans due to the higher risk for lenders and the convenience of quick, flexible funding. Typical costs include:

Interest rates: 8% to 15% or higher, based on risk assessment.
Origination fees: 1% to 5% of the loan amount.
Closing costs: Legal, appraisal, and administrative fees.
Points: A percentage of the loan amount charged upfront.

Online calculators can help estimate these costs.

Alternatives to working with hard money lenders

If you’re a homeowner exploring alternatives to hard money loans, here are several options to consider:

Take out a second mortgage: A home equity loan or home equity line of credit (HELOC) allows you to borrow against the equity in your home. This option can provide needed funds at a lower interest rate than a hard money loan.
Cash-out refinance: This option lets you refinance your current property, pulling out cash based on its equity. It typically offers lower interest rates compared to hard money loans, making it a cost-effective choice.
Borrow from family or friends: A personal loan from family or friends can come with more flexible repayment terms and possibly lower or no interest rates, offering a more affordable alternative to other financing methods.
Use a government-backed loan program: Programs like the FHA, VA, or USDA loans can help you purchase homes with lower down payments and reduced interest rates, making them an appealing option for those who qualify.
Peer-to-peer loan: These loans are provided by individual investors through online lending platforms. While they function similarly to hard money loans, they often come with different terms and may have more competitive rates.
Specialized loan programs: Some lenders offer specialized loans for fixer-uppers or investment property refinancing. These can be a good option if you want to replace an existing hard money loan with more favorable terms.
Request a seller financing option: In certain cases, sellers may agree to finance the purchase themselves. This option can lead to lower closing costs and more flexible eligibility requirements, making it a viable alternative.

How to buy before you sell

When you’re ready to buy a new home before selling your current one, timing can be everything. HomeLight’s Buy Before You Sell (BBYS) program offers a seamless solution for this situation, making the transition easier and less stressful.

BBYS lets you leverage the equity in your current home to make a strong, non-contingent offer on a new property. If your home qualifies, you can get an equity unlock amount approved in as little as 24 hours, with no upfront costs or obligations. This allows you to purchase your next home confidently and sell your current home on your timeline.

Here’s how HomeLight Buy Before You Sell works:

The program has a flat fee of 2.4% of your current home’s sold price, which may be outweighed by potential savings on moving costs, temporary housing, and potentially securing a better price for your new home. Plus, BBYS fees are typically lower than the interest rates on bridge loans, which can range from 9.5% to 12%.

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3 top hard money lenders in Brooklyn

Traditional lenders might not be the solution for every real estate investment. If you want to move quickly and capitalize on an opportunity, explore the hard money lending options in Brooklyn.

NYC Hard Money Lender

NYC Hard Money Lender exterpise includes fix and flip loans, bridge loans, and other short-term financing options, making them a go-to source for investors looking to secure funding in a competitive market.

Lending clientele: Residential and commercial real estate investors

Loan criteria: LTV from $100,000 to and up

NYC Hard Money Lender has a 5.0-star rating on Google. Clients frequently commend the company for its fast approval process and personalized service.

nychardmoneylender.com

718-577-1398

Hard Money Brooklyn

Hard Money Brooklyn focuses on offering fast, reliable funding solutions with a streamlined process that allows for quick closings, often within days. Their expertise is in financing fix-and-flip projects, rental properties, and commercial real estate ventures.

Lending clientele: Residential and commercial real estate investors

Loan criteria: They provide short-term mortgages from $100,000 to and up

Hard Money Brooklyn has a 4.5-star rating on Google. Clients appreciate the company’s straightforward process and quick turnaround times.

hardmoneybrooklyn.com

718-593-4527

Acqua Funding

Acqua Funding provides quick and reliable solutions for real estate investors. They focus on offering hard money loans tailored for residential and commercial projects, including fix and flip, rental, and bridge loans.

Lending clientele: Residential and commercial real estate investors.

Loan criteria: LTV up to 90% of ARV

Acqua Funding has a 4.9-star rating on Google. Customers appreciate the company’s transparency and the speed at which they process loans.

acquafunding.com

1-844-630-0669

Should I partner with a hard money lender in Brooklyn?

Determining if a hard money loan is right for you depends on your specific real estate investment goals in Brooklyn. These loans are best suited for real estate investors who need quick access to funds for projects like flipping homes or buying rental properties. If you’re prepared to handle the higher interest rates and shorter repayment terms in exchange for fast, flexible funding, working with a hard money lender in Brooklyn could be the right move.

For homeowners looking to leverage their equity without taking on a high-interest loan, HomeLight’s Buy Before You Sell program offers an excellent alternative. Instead of managing the complexities of hard money loans, you can pay a small flat fee and make a competitive offer on your next home.

As with any significant financial decision, consider your long-term strategy and consult with a financial advisor to ensure it aligns with your overall investment objectives. If you’re looking for a more seamless transition, HomeLight can help you explore the best option for your needs.

Header Image Source: (Chase Baker / Unsplash)

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