Hard money lending in New York

This page covers four things about borrowing hard money in New York: whether the lender needs a licence, what actually decides whether your rate is lawful, how federal preemption interacts with it, and how long deals take here. Every figure shows the statute or dataset it came from.

Does a lender need a licence in New York?

Separate from licensing, New York's usury rules are among the tightest in the country - civil usury at 16% and criminal usury at 25% - with exemptions that turn on the borrower being an entity and the loan being business purpose. Get the structure reviewed by a New York attorney.

New York's interest-rate limits are among the tightest in the country and carry real teeth: civil usury at 16% and criminal usury at 25%. Exemptions turn on the borrower being an entity and the loan being genuinely business purpose.

This matters more than it looks on a short hard money loan. Rate plus points plus fees, annualised over a six-month hold, crosses those thresholds easily - the points-to-APR converter will show you how easily. Whether the effective rate or the note rate governs is a question for a New York attorney, and it is worth asking before you sign rather than after.

What decides whether a rate is legal in New York

Almost every site publishing on this topic gives you one number per state. That number is close to meaningless on its own. A rate that is lawful for one lender in New York can be unlawful for another on the same day, on the same property, because four separate questions decide which body of law applies to your loan.

Purpose

Many states remove the usury defence entirely for business-purpose loans. Washington is the clean example: under RCW 19.52.080 a borrower on a loan made primarily for a commercial, agricultural, investment or business purpose may not claim a defence of usury. This is why every hard money lender makes you sign a business-purpose affidavit.

Borrower

Several states exempt entity borrowers from some or all of the cap. In New York a corporation or LLC cannot assert the 16% civil usury defence at all, though the 25% criminal ceiling still applies. This is the other half of why lenders insist on title vesting in an LLC.

Lender

Licensed lenders frequently operate under their own rate statute rather than the general cap. California is the sharpest case: a loan made or arranged by a licensed real estate broker and secured by real property is exempt from the constitutional rate limit outright, under Civil Code §1916.1.

Lien position

If it is, federal law may preempt the state rate limit entirely under 12 U.S.C. §1735f-7a. A great many hard money loans are first-lien residential, so this gate is live far more often than borrowers realise.

Rate limits in New York

Two ceilings, and which one applies depends on the borrower and the loan size.

New York runs two separate ceilings. The civil rate is 16% and the criminal rate is 25%. They are not alternatives; a loan can clear one and breach the other, and the consequences differ sharply.

The structure is tiered by size. Below $250,000 both ceilings apply in full. At $250,000 and above the 16% civil cap falls away. At $2,500,000 and above both fall away, under Gen. Oblig. Law §5-501(6)(b), for any borrower.

Independently of size, a corporation or LLC generally cannot raise the 16% civil usury defence, but the 25% criminal ceiling still binds. So the common hard money structure of a mid-six-figure loan to an LLC sits in a band where the civil cap is gone and the criminal cap is not.

New York is also the state whose confession-of-judgment reform changed the landscape for out-of-state borrowers. If that clause is in your documents, read our page on it before signing.

Federal preemption, and the distinction nearly everyone gets wrong

Two different provisions of the Depository Institutions Deregulation and Monetary Control Act of 1980 are routinely written about as if they were one. They are not, and only one of them normally touches a hard money loan.

Section 501 — 12 U.S.C. §1735f-7a

Preempts state limits on the rate, discount points, finance charges and other charges on a loan secured by a first lien on residential real property, made after 31 March 1980, that meets the federally related mortgage loan definition. This one can apply to hard money, because a great many hard money loans are exactly that. States had until 1 April 1983 to opt out.

Section 521 — 12 U.S.C. §1831d

Lets federally insured state-chartered banks charge the rate allowed where the bank is located, and export it. Hard money lenders are generally not banks, so this provision usually has nothing to do with your loan, despite how often it is cited in articles about private lending.

Who supervises this in New York

New York State Department of Financial Services (DFS). Regulator names change; the CSBS directory is the authoritative list, and NMLS Consumer Access is where you check a specific company for free.

Regulators answer licensing questions at no charge, and a narrow question gets a useful answer where a broad one does not. Send this:

For a business-purpose loan to an LLC secured by investment property in New York, how do the civil and criminal usury limits apply, and are points and fees included?

Ask the New York State Department of Financial Services (DFS)

How long deals actually take in New York

Hard money is priced by the month, so the exit timeline is the cost driver. Median days on market below is measured from Redfin's county-level sales data for single-family homes (May 2026). The term column adds a five-month renovation and 45 days for your buyer to close, which is the part borrowers routinely leave out of the term they request.

Before you sign in New York

1. Confirm the licence, or confirm on the record that none is required for this loan type. How to verify a lender.
2. Establish which of the four gates your loan goes through, because that decides which rate limit applies.
3. Score your term sheet against the 14 red flags.
4. Price the loan on total cost, not rate. True-cost calculator.