Hard Money Lenders Rochester: What You Need to Know

If you’re a real estate investor in Rochester, you know the local market can move quickly, and having access to flexible financing is essential. Whether you’re looking to flip homes in the South Wedge or purchase rental properties near Park Avenue, hard money lenders could offer the short-term funding you need to secure a deal fast.

Hard money loans differ from traditional financing in that they prioritize the property’s value over the borrower’s credit. These loans can be a good option for investors who need quick access to cash, especially in a competitive market like Rochester’s.

If you’re exploring options for your next project, understanding the benefits and potential costs of working with a hard money lender can help you decide whether it’s the right move for you. Hard money loan options can be a key strategy for some investors.

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?

Hard money lenders provide short-term loans primarily to real estate investors, including buyers of rental properties and house flippers. Instead of focusing on the borrower’s credit score, these lenders assess the property’s potential value after renovations, known as the after-repair value (ARV), to determine the loan amount.

Interest rates for hard money loans are typically higher than traditional loans, often ranging between 8% and 15%, with additional fees such as origination costs and points. If a borrower cannot repay the loan, the lender has the right to take ownership of the property, using it as collateral. This makes hard money loans a high-risk, high-reward financing option for both the lender and the borrower.

How does a hard money loan work?

Hard money loans in Rochester work differently from traditional mortgages, offering unique advantages and challenges for investors. Here’s a breakdown of how these loans function and what you can expect:

Short-term loan: Hard money loans are short-term, typically lasting 6 to 24 months, unlike a traditional 30-year mortgage. They’re designed to bridge a financial gap for investors.
Faster funding option: While traditional loans can take 30 to 50 days to process, hard money lenders can often provide funding within days, making them ideal for quick real estate deals.
Less focus on creditworthiness: Hard money lenders pay less attention to a borrower’s credit score. Instead, they assess the potential of the property itself.
More focus on property value: These loans rely heavily on the loan-to-value ratio and the property’s future after-repair value (ARV) to determine loan amounts.
Not traditional lenders: Hard money lenders are private individuals or companies, not banks or government-backed institutions, which allows for more flexible terms.
Loan denial option: Unlike traditional lenders, hard money lenders can deny a loan based on the property’s risk or potential, even if a borrower’s creditworthiness is solid.
Higher interest rates: Expect interest rates significantly higher than traditional loans, often ranging between 8% and 15%, compared to conventional rates for a 30-year mortgage.
Might require larger down payments: Hard money loans typically require a down payment of 20%–30% or more to secure the property.
More flexibility: Lenders may be more flexible with loan terms and repayment schedules compared to traditional mortgage options.
Potential for interest-only payments: In some cases, borrowers may only be required to make interest payments until the end of the loan term, with the balance paid at the close of the loan.