Maximum interest rate

[Zipzip]

Hello

I am trying to find what is the maximum interest rate in Missouri for real estate.

I am owner financing properties also known as contract for deed using a notarized contract. I have been going with 9% in the past as I am sure that is ok. I would like to know if I can go higher? Can I do 15% 20% doubt I will go that high just wondering where I can't go as the usuary penalties are quite harsh.

The law is not clear enough to me as it has exceptions for real estate then mentions agriculture.

I am selling residential real estate homes in Missouri.

I have contacted several attornies to no avail. One told me to contact the bank...

Thanks

 

[adjusterjack]

I have contacted several attornies to no avail. One told me to contact the bank...

Did you offer to pay any of them their hourly rate to do the research for you.

Perhaps you should do that as I don't have the time to read all the statutes:

https://law.justia.com/codes/missouri/2017/title-xxvi/chapter-408/

 

[Zipzip]

This is what I can't make sense of.

408.035. Unlimited interest, when allowed. — Notwithstanding the provisions of any other law to the contrary, it is lawful for the parties to agree in writing to any rate of interest, fees, and other terms and conditions in connection with any:

3) Real estate loan, other than residential real estate loans and loans of less than five thousand dollars secured by real estate used for an agricultural activity; or

 

[Taxing Matters]

This is what I can't make sense of.

408.035. Unlimited interest, when allowed. — Notwithstanding the provisions of any other law to the contrary, it is lawful for the parties to agree in writing to any rate of interest, fees, and other terms and conditions in connection with any:

3) Real estate loan, other than residential real estate loans and loans of less than five thousand dollars secured by real estate used for an agricultural activity; or

Which means that you are subject to the state usury laws in your real estate loans when the loans are (1) for residential real estate — which means any real estate that would be where people live, not just single family homes and (2) agricultural loans of less than $500,000. For those two classes of real estate loan the usury laws are going still apply. If you are lending on agricultural real estate of $500,000 or more or any commercial real estate then you wouldn't have to worry about the usury laws. Though you didn't say, my bet is that the real estate involved in your deals is residential homes since that is pretty much the only kind of real estate deal where I see contracts for deed being used.

 

[LdiJ]

The keyword in any searching that you do is searching for usury laws for the state of Missouri. That is an unfamiliar word to most people but its what applies when you are talking about a situation where the interest might be too high by law. Taxing Matters mentioned the word but I wanted to emphasize it.

 

[Taxing Matters]

While I gave you the meaning of the one part of Missouri law that you provided, there is a lot more to the Missouri usury laws and more exemptions than just the one you asked about. A summary of the usury laws for Missouri is provided by the state Division of Finance that should help you get started. Still, you probably should see an attorney to go over exactly what you'll be doing to see if you fall into any of the exemptions. Relying on just a summary is risky.

 

[Zipzip]

Thank you for the replies.

I did find something else that mentions charging 10%. I don't know if it is worth taking a risk for 1 point of interest, but it does seem clear to me it is ok to charge 10% on any contract. If I am reading it correctly.

408.030. Interest, maximum rate allowed — penalty for overcharge, limitation on action for — "market rate" to be determined, when, how — discounting to financial organizations authorized. — 1. Parties may agree, in writing, to a rate of interest not exceeding ten percent per annum on money due or to become due upon any contract, including a contract for commitment; except that, when the "market rate" exceeds ten percent per annum, parties may agree, in writing, to a rate of interest not exceeding the "market rate".

 

[FarmerJ]

Zip when I bought my first home on a CD and then my third place that was a 4 plex on a CD that I had moved into one unit to force the taxes down into homestead rate , both were 10% interest with zero balloon , ten percent may seem high compared to regular bank held mortgages but with current interest rates being l less now then they were back when I had those places I suggest if you go for more than ten percent what may well happen is that you will scare off buyers OR you will end up with a property where the buyer may not be able to afford to maintain it & increase the risk of getting it back in worse shape OR buyers who may find a way to pay you off early and if they do that then your going to lose out on all that interest money ( if your intention was to sell CD over the long haul in hope of gaining a decent reward from higher interest. ( ten percent is not horrid and keep in mind when things like this are not heavily regulated sooner or later those in office may decide to regulate it which is why my state has a LONG demand notice required of landlords who want to evict non payers or actions of landlords causing some to want to push harder for rent controls ) In your opening post you mentioned 15 and 20 % interest I assure you that much will scare off buyers who may have poor credit but still have managed to come up with enough down to make serious offers but ten percent is not horrid especially if the buyer understands the risk to both buyer and seller when selling via CD.