449. Real Estate as Collateral

65:11 One may not lend a person a set measure of grain because the price may go up and when he is repaid with the same volume, it will be worth more than what he lent. If they set a price regardless of the market value of the grain, then the borrower may only repay that amount. If the borrower has even a little of this type of grain, then he may borrow even a large amount of it; if there is an accepted market price for this type of grain, it is permitted to lend even to one who does not have any grain of this type. These rules only apply when lending and repaying the same type of grain; repaying with a different kind, such as lending wheat and repaying with millet, is always prohibited, even when they have the same market value. All this is not the case when dealing with small household measures, in which case people are generally not concerned with changes in market prices. For example, a woman may lend her friend a loaf of bread without concern.

If one lends money relying on the borrower’s house, field, or place in the synagogue as security for the loan, the parties may agree to allow the lender to take whatever earnings the security may generate and to deduct it from the outstanding debt. In such case, he deducts a set amount each year for the duration of the loan, regardless of how much income the property generates. However, the lender may not rent the property to the borrower himself. There are many laws pertaining to loans made using real estate as a security so one should not engage in such a transaction without consulting an authority.