What Is Usury in Real Estate And How to Avoid It?

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Written By Tommy

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If you’re a homeowner or considering becoming one, you need to know what is usury in real estate. It could be costing you more than you think!

Usury laws are designed to protect consumers from being charged excessive interest rates on loans, but they can also apply to other types of transactions like credit cards and mortgages. In the case of real estate, usury laws may dictate how much interest a lender can charge on a home loan.

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What is Usury in Real Estate?

Usury in real estate is the practice of charging excessive or illegal interest rates on loans used to finance the purchase of a property. This can make it difficult or impossible for borrowers to repay the loan, leading to foreclosure.

What is usury in real estate laws? Usury laws vary from state to state, but typically, any interest rate above 10% is considered excessive. Some states have even higher limits, while others have no usury laws at all.

If you’re considering taking out a loan to finance the purchase of property, be sure to check the interest rate and make sure it falls within the legal limit for your state.

How Usury Works

What is usury in real estate and how does it work? When you take out a bank loan or an online personal loan, the lender will charge a fee for giving you money. There are laws in place that ensure that lenders aren’t overcharging you for the privilege of lending you cash.

Interest rates are a fee you pay for borrowing money, while interest is the fair practice of lending out money to people. Usury is the practice of unfairly overcharging for loans, and is illegal.

Most states limit the amount of interest you can be charged on a loan. These caps can vary depending on the type of loan and which state you live in.

In the state of Hawaii, for instance, interest rates on loans are capped at 10%, and credit card interest can be as high as 18%.

The intent of most usury laws is to prevent lenders from taking advantage of unknowing consumers. Lenders who charge excessively high rates can force their customers into a vicious cycle of borrowing and repaying, effectively trapping them in an endless loop of debt.

Debt is a slippery slope, and falling into it can result in serious financial trouble. According to the Consumer Financial Protection Bureau (CFPB), these loans are targeted at those with limited financial means, who may not be able to repay them.

These vulnerable customers often find themselves between a rock and a hard place, having to decide between taking out another payday loan, going into default, or skipping other financial obligations. By enforcing fair lending practices, all lenders can be held accountable.

What is Predatory Lending?

Predatory lending is related to what is usury in real estate. 

Usury laws are designed to protect consumers from unscrupulous loan sharks who take advantage of their vulnerable state. Abusive and unethical practices include using misleading terms, hidden fees, and deception to coerce people into signing for a loan they cannot afford.

These “payday loans” are often targeted at individuals without access to more traditional types of credit. They are small loans, typically less than $500, and are due within 2-4 weeks of when they are issued.

Payday loans are short-term loans that are typically paid back in full on the borrower’s following paycheck. These loans are accompanied by high-interest rates, sometimes reaching 400%.

Different states have varying regulations on these loans, with some limiting how much interest can be charged, and others banning them outright.

what is usury in real estate(Source)

The Cost of Usury on Mortgages

Some of the potential costs that may be associated with usury in real estate transactions include:

  • Higher interest rates on loans
  • Increased difficulty in obtaining financing
  • Higher monthly payments
  • A longer loan term
  • Added fees and charges

How Usury Impacts Homeownership

Homeownership is one of the most important aspects of the American dream. It is a tangible representation of the hard work and dedication that we put into our lives. For many of us, our home is our largest investment and our most valuable asset.

Sadly, some seek to take advantage of desperate homeowners through the practice of usury.

Usury is the illegal practice of charging excessive interest on a loan. This can often lead to homeowners being unable to keep up with their mortgage payments, leading to foreclosure.

The impact of usury on homeownership can be devastating. It can strip away the equity in a home, leaving the homeowner owing far more than the property is worth. It can also lead to financial ruin, as homeowners are forced to declare bankruptcy.

The best way to protect yourself from usury is to be aware of the signs. If you are offered a loan with an interest rate that seems too good to be true, it probably is. Be sure to read the fine print carefully and understand all of the terms and conditions before signing anything.

If you find yourself in a situation where you are being charged excessive interest, there are options available to you. You can file a complaint with the Consumer Financial Protection Bureau or your state attorney general’s office. You may also be able to negotiate a lower interest rate with your lender.

No one should have to suffer the financial devastation that usury can cause. If you are a victim of this predatory practice, know that you are not alone and there are resources available to help you.

Alternatives to Paying Excessive Interest Rates

As someone who has probably been paying interest on a mortgage for years, you may be wondering if there are any alternatives to paying excessive interest rates. The answer is yes!

Here are a few options for you to consider.

1. Refinance Your Mortgage

If interest rates have gone down since you got your mortgage, you may be able to refinance and get a lower rate. This could save you hundreds of dollars each month.

2. Get a Home Equity Loan

If you have equity in your home, you may be able to take out a loan against that equity and use the money to pay off your high-interest mortgage.

3. Sell Your Home

If you really can’t stand the thought of paying high-interest rates any longer, you could always sell your home and use the proceeds to pay off your mortgage.

These are just a few potential solutions to the problem of high-interest rates. Talk to your financial advisor to see if any of these make sense for your situation.

Frequently Asked Questions

What is usury in simple terms?

Usury is the practice of lending money at an unreasonably high rate of interest. In the context of real estate, usury occurs when a lender charges a borrower an excessively high-interest rate on a mortgage loan.

What is the difference between usury and interest?

Usury is the practice of lending money at an unreasonably high rate of interest. In real estate, usury laws vary from state to state, but typically prohibit interest rates above 10%.

Who do usury laws apply to?

Usury laws apply to anyone who is lending money to earn interest.


As a homeowner, it’s important to be aware of what is usury in real estate and how it may apply to your mortgage. Usury laws are designed to protect consumers from being charged excessive interest rates, and while they may not always dictate the exact interest rate you’ll pay on your loan, they can provide some guidance as to what is considered fair. If you’re concerned that you’re paying too much in interest on your home loan, talk to your lender about ways to lower your payments.