How private mortgage investment works in New Zealand

Private mortgage investment in NZ, as HomeSec offers it, means putting your money into one secured business loan you have picked, rather than into a fund that picks for you. You read the loan’s due diligence pack, set your contribution, are recorded on the mortgage registered with LINZ, and are repaid directly into your own bank account.

HomeSec Business Finance, a private business lender lending since 2004, with its New Zealand office in Auckland, lends mainly from its own balance sheet. Some loans are opened to wholesale investors as co-funders, and HomeSec’s own money stays in each of those loans. New Zealand co-funders lend on New Zealand loans only, secured over New Zealand property.

What is private mortgage investment in New Zealand?

Private mortgage investment is lending to a borrower outside the banking system, with a mortgage over their property as security and your share of the loan identified from the outset. You see the property, the borrower, what the money is for, the amount, the term and the rate before deciding anything.

The demand comes from a gap in New Zealand bank lending. University of Auckland research published in May 2026 found business lending made up just 18% of total bank lending in 2024, against 30% in Australia, and banks still asked for property security and personal guarantees. The Reserve Bank’s May 2026 Financial Stability Report found small firms had paid about 390 basis points over the 90-day rate across the previous three years. Established businesses with equity in property often turn to a private lender when they need money quickly or on flexible terms, and they pay a higher rate for that speed.

HomeSec’s loans are for genuine business or investment purposes, usually run 1 to 12 months and go up to NZ$1 million. Each is secured by a registered first or second mortgage over New Zealand residential or commercial property. Residential loans stop at an 80% loan-to-value ratio (LVR), commercial loans lower, and there is no construction or development lending. For how this differs from holding units, see how a co-funded loan compares with a mortgage fund.

How does co-funding a loan work, from first call to final repayment?

Every co-funded loan passes through the same six stages.

Your first loan is the slowest, largely because the documents are unfamiliar. By the second or third, the rhythm is familiar.

Stage 1: Confirm you are a wholesale investor

Co-funding is offered only to wholesale investors under Schedule 1 of the Financial Markets Conduct Act 2013. The usual route is an eligible investor certificate. You certify in writing that your past experience acquiring or disposing of financial products lets you judge an offer’s merits, your own information needs and whether the information given is adequate, and you state your grounds. A financial adviser, qualified statutory accountant or lawyer then confirms it in writing, and it lasts two years. In September 2025 the High Court, on a case stated by the FMA, clarified what a valid certificate needs. Others qualify under the investment activity or large tests, for example by having held at least $1 million of specified financial products at some point in the past two years. You can lend personally, through a company or as trustees of a family trust. Each route is set out on our wholesale investors page.

Stage 2: HomeSec sends you a loan

Every loan starts with HomeSec. It finds the borrower and works through its 50-point due diligence checklist, and Paul Stone and Jason Brockmuller, HomeSec’s joint CEOs, are both part of the decision. Only loans HomeSec is prepared to fund with its own money go to investors. The pack comes by email, and a text message tells you it is waiting.

Stage 3: You decide, and choose your amount

Take whatever time you need with the pack, and put any questions to our Funding Manager, reachable seven days a week on 09 888 6550. If the loan fits, tell us how much you want in it, from NZ$100,000. If it doesn’t, decline. Saying no carries no cost and changes nothing about what you are offered next.

Stage 4: The loan agreement is drawn up with you as lender

After you commit, HomeSec documents the loan with you as a named lender, whether that means you personally, your company or your trust. The borrower gets independent legal advice from their own lawyer before signing. For you, that advice is protection: a borrower whose obligations were explained by a lawyer acting only for them will find it much harder to dispute the documents later.

Stage 5: Settlement and registration with LINZ

At settlement the mortgage is registered on the record of title through Land Information New Zealand, showing you for your exact contribution beside HomeSec’s share. If a loan is secured by a caveat instead, the pack tells you, and your name goes on the caveat. You pay your contribution from your own bank account for that settlement. Until then your money stays with you; it is never parked in a pool while a loan is found.

Stage 6: The borrower repays you directly

At maturity, the borrower’s principal and interest are paid into your nominated bank account rather than through HomeSec. If you need your capital before then, ask, and HomeSec will buy your share out and return your principal. The options, and what happens when a borrower is slow to repay, are on our getting your money back page.

What is inside a loan’s due diligence pack?

A pack is HomeSec’s file on a single loan. It holds the information HomeSec relied on before committing its own money, laid out so you can test the loan the way a lender would.

Reading one for the first time? Our guide to reading a loan pack shows which figures to check first.

What does HomeSec take care of?

Co-funding puts you in the lender’s seat without the lender’s workload. HomeSec:

• Finds the loans. Borrowers come to HomeSec, so you never need to market for them.
• Does the credit work. The checklist, the property review and the lending decision all happen before a pack is sent.
• Handles documents and settlement. It prepares the loan agreement and coordinates the lawyers and the LINZ registration.
• Manages the loan. It deals with the borrower day to day and works on the repayment as maturity approaches.
• Leads any enforcement. If a borrower defaults, the mortgage can be enforced through the New Zealand courts and the mortgagee sale process under the Property Law Act 2007. That begins with a default notice giving at least 20 working days to fix the problem, and a selling mortgagee must take reasonable care to obtain the best price reasonably obtainable. HomeSec runs that process with specialist lawyers, with its own money in the same loan.

The choice of loan, the amount and the decision to stop all stay with you.

Why does HomeSec lend its own money alongside yours?

Because it is the plainest test of a lender’s conviction. Every loan offered to co-funders carries HomeSec’s capital, secured by the same mortgage and on the same terms as your share. A loan that goes wrong costs HomeSec as well.

HomeSec’s income also comes mainly from loans being repaid, not from writing them. Its incentive is loans that come back in full, not a high volume of new ones.

Can you co-fund from anywhere in New Zealand, or overseas?

Yes. The whole process runs remotely: packs and updates arrive by email and SMS, and your contribution moves by bank transfer. A retired farmer in Southland, a trustee in Tauranga and a New Zealander working in Singapore follow the same steps, and each is named on the mortgage in the same way.

Interest you earn is taxable income, and resident withholding tax applies at the rate that fits your circumstances. Interest is not subject to GST. Your accountant can confirm how RWT will be handled on your co-funding. If you live abroad, interest paid to non-residents generally attracts non-resident withholding tax, or a 2% approved issuer levy where the payer is registered for it, and a double tax agreement can reduce the rate, as PwC’s summary explains. Your adviser can confirm where you stand.

How is co-funding different from a mortgage fund?

The two sit on the same kind of security but work in opposite ways.

New Zealand has lived through the downside. In July 2008 the Guardian Trust Mortgage Fund froze with $249 million belonging to about 3,700 investors, and a wind-up was proposed the following January. A co-funded loan can’t be frozen like that. There is no pool, so no one else’s withdrawal can hold up your repayment.

Who is co-funding suited to?

It suits people who want strong, secured income and are comfortable deciding for themselves: business owners after a sale or between ventures, retirees, family trusts, companies, family offices, and New Zealanders abroad with capital to put to work at home.

It is a poor fit if you may need the money at short notice, or if you would rather not read a pack before committing. Each loan runs its term, and every decision is yours. The standards each loan must meet are in our lending rules.

Would you like to see a real loan pack?

Reading an actual pack is the quickest way to understand co-funding. Leave your details on the register your interest page and our Funding Manager will get in touch.