The Washington market is one metro but three legal systems. An investor who finances a rowhouse in the District, a rehab in Prince George’s County, and a flip in Arlington is operating under three different usury regimes, three different licensing frameworks, and three very different attitudes toward lenders. Understanding those differences is part of underwriting a DMV deal. What follows is educational background, not legal advice — confirm specifics with counsel licensed in the relevant jurisdiction.
Washington, DC: a 24% cap with an investment-loan exemption
Under DC Code § 28-3301, parties to a written contract may agree to interest up to 24% per annum (the default is 6% where there is no contract). Read alone, 24% looks like a hard ceiling. But the usury chapter contains a key carve-out: a loan of more than $2,500 that is not secured by the borrower’s residence is not subject to the chapter, and any agreed rate is lawful. Business-purpose investment loans on non-owner-occupied property fall within that exemption. Where the cap does apply, the penalty is severe — a lender who contracts for more forfeits the entire interest.
The practical result is that hard money on a DC investment property is not constrained by the 24% consumer figure, provided the loan is genuinely business-purpose and the collateral is not the borrower’s home.
Maryland: low defaults, a commercial path, and no mislabeling
Maryland is the most intricate of the three. Commercial Law § 12-103 starts at 8% simple interest on a signed writing, unless another subsection applies. Later subsections allow higher rates, including any rate on the commercial paths described below. Crucially, § 12-106.1 makes it a violation to require a borrower to falsely state that a loan is commercial. Maryland regulators and courts scrutinize the substance of the transaction, and the usury penalty is stiff: forfeiture of up to three times the usurious interest.
For investors, Maryland is open if the structure is real. A genuine business-purpose loan, documented and vested in an entity, uses the commercial path. A consumer loan dressed up as commercial is what the penalty is built to catch.
Virginia: the most lender-friendly — business loans uncapped
Virginia is the outlier in the investor’s favor. Under Va. Code § 6.2-317, a loan of $5,000 or more made for business or investment purposes may carry any rate of interest the parties agree to. A loan is business purpose if it is not for personal, family, or household use. On top of that, § 6.2-308 provides that business entities generally cannot plead usury at all. The general 12% ceiling that applies to other contracts simply does not bind a properly structured investment loan in Virginia.
This is why Northern Virginia is a comparatively easy jurisdiction to lend in, and why exits there tend to be cleaner than across the river in the District.
The common thread: business purpose and entity vesting
Three statutes, one conclusion. In DC, Maryland, and Virginia alike, keeping a loan business-purpose, non-owner-occupied, and vested in a business entity is what places it within the commercial exemptions and outside the consumer usury caps. That is the legal reason — not merely a paperwork preference — that Jaken Finance Group vests investment loans in an LLC and lends only on non-owner-occupied investment property. See our loan eligibility and requirements for how that structure shows up in underwriting, and the Washington DC hard money loans page for program specifics.
A borrower who routes an owner-occupied or personal-use loan through a business wrapper invites the opposite result — recharacterization as consumer credit, which drags in the caps and, in Maryland, the anti-mislabeling penalty. Structure follows substance.
A note on licensing
Each DMV jurisdiction regulates residential, consumer mortgage origination. DC does so under its Mortgage Lender and Broker Act. Maryland does so under Title 12 licensing provisions. Virginia’s consumer-finance chapter, by its terms, addresses loans for personal, family, household, or other nonbusiness purposes. Business-purpose investment lending secured by non-owner-occupied property is treated differently, and requirements depend on the loan, the property, and the parties. Rather than assert a blanket exemption, the accurate guidance is to confirm the licensing posture of any DMV deal — and your lender — with counsel before closing.
Three rate paths, in the words of the statutes
This is background for investors, not advice for your loan. Counsel licensed in the jurisdiction should apply it to the file.
| Jurisdiction | Default or general ceiling you can point to | Path that can take the rate outside that ceiling | Source opened for this summary |
|---|---|---|---|
| District of Columbia | 24% a year on many written contracts | A loan over $2,500 that is not secured by the borrower’s home, if a listed business or investment purpose is met | DC Code § 28-3301 |
| Maryland | 8% simple interest under a signed written agreement, unless another subsection applies; some non-mortgage loans can reach 24% with extra conditions | Any rate on a loan to a corporation; on a commercial loan over $15,000 not secured by residential real property; or on a commercial loan over $75,000 secured by residential real property | Md. Code, Com. Law § 12-103 |
| Virginia | 12% a year, except where another statute allows more | Any agreed rate on a business or investment loan of $5,000 or more | Va. Code § 6.2-303 and § 6.2-317 |
In the District, § 28-3301(a) lets a written instrument go to 24% a year, aside from other listed exceptions. Subsection (d) is the investment carve-out. If the borrower receives more than $2,500, and the loan is not secured by residential property or a co-op that is the borrower’s home, the usury chapter drops away when one of the listed conditions is true. Those conditions include a loan to acquire or carry on a business, professional, or commercial activity, and a loan to acquire property as an investment. A non-owner-occupied rental can fit that investment condition. An owner-occupied house generally does not, because the carve-out excludes loans secured by the borrower’s residence.
Maryland’s § 12-103(a) starts at 8% simple interest when there is a signed writing, unless a later subsection applies. Subsection (e) is the any-rate door. A lender may charge any rate if the loan is made to a corporation. A lender may also charge any rate on a commercial loan over $15,000 that is not secured by residential real property. A commercial loan over $75,000 that is secured by residential real property can also take any rate, but it must comply with § 12-407.1. For this subsection, residential real property means owner-occupied property with a dwelling for not more than four families. A loan to a corporation is the cleanest reading for an entity-vested investment, and it does not depend on guessing whether the collateral is “residential” under that definition.
Virginia’s general contract ceiling in § 6.2-303 is 12% a year, except where another law allows more. Section 6.2-317 is one of those laws. A loan of $5,000 or more for business or investment purposes is outside the usury defense. The loan is business or investment purpose if it is not for personal, family, or household use. The statute says those personal uses do not include a passive or active investment.
Who cannot plead usury in Virginia
Va. Code § 6.2-308 goes further than the purpose test. The covered entities cannot use the usury chapter, or other usury case law, to avoid interest they contracted to pay. Those entities are a corporation, certain partnerships including ones formed outside Virginia, a limited liability company, a business trust, and a joint venture organized to hold, develop, and manage real estate for profit.
The section also says usury law does not stop recovery of the interest that entity agreed to pay, even if the rate is above the contract ceiling and the rate is written on the face of the note. An LLC vesting is not a decoration in Virginia. It is part of why a business-purpose note can sit inside the 8.99%–13.5% fix-and-flip and bridge range. A DSCR note in the 5.75%–10.5% range can sit there too. The 12% general ceiling is not the binding cap on those files. That is still not a promise about your file. It is why the closing binder shows an entity, a business purpose, and non-owner-occupied collateral.
Maryland’s penalty for a fake commercial label
§ 12-106.1 bars a false commercial label. A person may not require that statement as a condition of the loan when the loan is not commercial. A willful violation generally means the lender forfeits to the borrower three times the interest and charges above what the law allowed, plus any other penalty in the title. If the loan was not subject to a legal maximum charge, the forfeiture is the finance charge, interest, points, and other fees, plus any other penalty in the title. The section does not erase the rebuttable presumption that a loan was made for commercial purposes. A written complaint can go to the Consumer Protection Division of the Office of the Attorney General, which may investigate and hold a hearing.
Do not sign a “this is commercial” certificate for a house you will occupy. The statute is aimed at that mismatch. Jaken Finance Group lends on non-owner-occupied investment property and vests those loans in an entity because the exemptions above depend on substance.
What to hand a DMV attorney
Bring the note, the deed of trust, and the entity documents, including who signs. Bring a short business purpose, such as a flip resale, a rental hold, or construction, with the address. Say whether anyone will live in the property. Name the state where the collateral sits, not the state on the driver’s license. For Maryland, say whether the borrower is a corporation and whether the loan clears the $15,000 or $75,000 commercial thresholds. For Virginia, confirm the loan is at least $5,000 and is not for household use. For the District, confirm the collateral is not the borrower’s home and the amount is over $2,500.
Fix-and-flip and bridge files at Jaken Finance Group close in 7–10 business days after the package is complete. DSCR files close in about 14 business days. The legal review is part of that package in the DMV. It is not a reason to skip entity vesting to “save a day.”
What this means for DMV investors
The cross-border spread is not just about price; it is about exit friction. Virginia’s uncapped business-loan rule and clean entity treatment make it the smoothest jurisdiction. DC’s investment-loan exemption keeps hard money lawful, but the District layers on rent control and TOPA at the exit — see our DC rent-control and TOPA compliance guides. Maryland sits between, workable with disciplined documentation. Investors who underwrite the same rent across all three — as in our Bethesda cross-border DSCR case study — often find the deal pencils very differently by jurisdiction. For a side-by-side of basis, rent control, taxes, and exit friction, see DC vs Maryland vs Virginia for real estate investors; for current rates and prices, see the DC, Maryland & Virginia rate report.
Structure every deal to the jurisdiction it sits in, document business purpose honestly, and get a local attorney’s read when a file is unusual or spans more than one jurisdiction. The three DMV systems reward the same habits — genuine business purpose, entity vesting, and non-owner-occupied collateral — even though they express them through different statutes. The law rewards clean structure, and so does underwriting.