Our lending rules: what every New Zealand loan must pass before you see it

HomeSec’s private lending criteria in NZ are seven fixed tests: a genuine business or investment purpose, a registered first or second mortgage on New Zealand property, a loan of up to NZ$1 million, a maximum 80% LVR on residential (lower on commercial), a term of usually 1 to 12 months, a credible exit, and no construction or development.

HomeSec Business Finance, a private business lender lending since 2004, with its New Zealand office in Auckland, applies these tests to its own money before anyone else’s. It puts its own capital into each loan it offers, so every rule below is one it lives with too. This page sets each one out, with the reason it exists and what it means for you as a co-funder.

What does every loan have to pass?

All of the following. A loan that clears nine of ten is declined.

Who borrows, and why do they pay more?

Mostly established businesses with equity in property they already own. They need funds quickly, or on terms a bank can’t offer in time, and HomeSec can decide within hours, with settlement possible within days. The higher rate pays for that speed and flexibility. It doesn’t reflect weak borrowers.

The gap is real in New Zealand. The Reserve Bank’s May 2026 Financial Stability Report found small firms paid spreads of about 390 basis points over the 90-day rate across the past three years, against 280 for medium-sized firms, and more often met higher costs or unacceptable terms even when they weren’t turned down outright. University of Auckland research found banks still wanted property as security for business lending, even where a government-backed scheme was involved. An owner with good property and a deadline often can’t wait for that process.

The purpose test also keeps the lending where it belongs. Credit for personal, domestic or household use falls under the consumer credit regime, and HomeSec doesn’t offer it. A clear business purpose shows you what the money does, whether the amount fits and where repayment will come from. A vague purpose tends to arrive with a vague exit.

How is the security held on a New Zealand title?

Through a mortgage registered on the title with Land Information New Zealand (LINZ). Each co-funder is named on it for the amount they put in, next to HomeSec. If a caveat is the security on a particular loan, the pack says so and the same principle holds.

A first mortgage ranks ahead of every other lender. A second mortgage ranks behind an existing lender, often a bank, and HomeSec’s LVR limit counts that earlier debt as well. New Zealand investors have reason to care about this. When Strategic Finance failed, 58% of its net loan book was second mortgages ranking behind $544.4 million of other lenders’ debt, much of it against development property. HomeSec’s second mortgages sit over existing, saleable property, with all secured debt capped at 80% of value on residential. Our guide to investing in first and second mortgages explains each position.

Every property behind a loan in this programme is in New Zealand. New Zealand co-funders fund New Zealand loans only.

How big are the loans, and how is your share set?

Loans go up to NZ$1 million. Within that, you decide your contribution, from NZ$100,000.

An illustrative example. A Hamilton business owner needs NZ$500,000 for a business purpose, secured over a rental property valued at NZ$900,000 that already carries a NZ$200,000 bank mortgage. Total secured debt would be NZ$700,000, an LVR of about 78%, so the loan fits under the cap as a second mortgage. You take NZ$250,000 of it; HomeSec and any other co-funders fund the rest, and each is named on the mortgage for its own share.

With more to place, spreading usually beats concentrating. NZ$1 million held as four loans of NZ$250,000, each with a different borrower, property and end date, carries far less single-loan risk than one large position.

Why is 80% the ceiling on LVR?

LVR, the loan-to-value ratio, is all the secured debt on a property as a percentage of its value. At 80%, at least a fifth of the value sits between the lenders and a loss. Commercial property gets a lower limit because it can take longer to sell and its values respond to different forces.

New Zealand’s own numbers show why that buffer exists, and why it isn’t a licence to lend to the limit. The REINZ house price index fell about 16% from its November 2021 peak before levelling out in 2023. Cotality had national values 18.2% below peak in August 2026, and BNZ puts Auckland about 22% and Wellington about 26% below their 2021 highs in nominal terms, while Canterbury, Otago and Southland have reached new highs. In the global financial crisis, QV values fell about 10%.

Three things work in a co-funder’s favour. Each loan is sized against today’s value, so earlier falls are already reflected in it. A 1 to 12 month term sees only part of any downturn, and the 2021 to 2023 slide took about 18 months to run. And 80% is a ceiling rather than a target; the pack shows where each loan actually sits. Our New Zealand property market guide has the regional picture, and LVR explained for mortgage investors works through more examples.

Why keep terms to 1 to 12 months?

Because risk builds with time. Over three or four years, a property market, an interest rate cycle and a business can all change a great deal. The Reserve Bank took the OCR from 5.50% to 2.25% and back up to 2.75% in little more than two years. A loan measured in months is written against conditions you can see.

A short term also keeps the borrower’s exit near enough to test properly, and it keeps you in charge. Each repayment returns your capital, and nothing rolls on unless you choose a new loan.

What makes an exit credible?

An exit strategy is the borrower’s plan for clearing the loan at maturity. Three are common:

• Selling a property, with the loan covering the time until settlement.
• Moving to another lender, where the borrower is switching to a bank or other financier and needs time to complete it.
• Business proceeds, such as a contract payment, the sale of a business or funds due within the term.

In general, an exit is credible when there is evidence behind it and when it fits the real world. A plan to move to a bank, for example, has to sit within what banks can actually do: under the Reserve Bank’s LVR restrictions, unchanged in August 2026, banks can write only 10% of their investor lending above 70% LVR. HomeSec won’t lend without an exit it believes in, the pack lays it out for you to judge, and HomeSec manages the borrower through to repayment, so you never have to chase anyone.

Why no construction or development?

This is the rule that most separates HomeSec from the lending that has hurt New Zealand investors.

• Unfinished security is hard to value and sell. A half-built project is worth what someone will pay to finish it.
• Overruns eat the equity. Every blowout comes out of the buffer that was meant to protect the lender.
• Timelines slip. Consents, contractors and weather turn months into years.
• The market can move before completion. A project costed for one market may be finished into another.

The finance company collapses showed what happens when those risks pile up. At Strategic Finance, commercial and residential development made up 62% of the book, residential subdivisions another 23%, and investors were expected to get back between 10% and 25%. In August 2024 Auckland developer Du Val Group was placed in statutory management. In November 2025 the Reserve Bank reported liquidations running above average, particularly in construction, and noted that some developers are turning to non-bank and offshore lenders. That is lending HomeSec leaves to others. New Zealand’s finance company collapses tells the wider story.

Which loans are turned down?

A large share of the job is saying no. However good the rate, a loan that fails a single line below never reaches you.

What does the 50-point checklist look at?

The same things you would examine if you were lending alone: the property, its title and current value; the LVR, including any debt ranking ahead; the borrower and their business; what the money is for; the term and rate; and the exit. Every loan goes through the same list, which is what makes one pack comparable with the next.

The result is the due diligence pack emailed to you. It holds the information HomeSec relies on when committing its own capital, with that loan’s risks spelt out. How private mortgage investment works shows where the pack sits in the process.

Who decides, and whose money goes in?

Joint CEOs Paul Stone, who founded HomeSec in 2004, and Jason Brockmuller are both involved in every loan decision, so no loan reaches investors on one person’s judgement.

HomeSec then commits its own capital, on the same mortgage and terms as you. It earns mostly when loans are repaid rather than when they are written, so it gains nothing from loans that shouldn’t have been made. If you want a single test of whether a lender believes its own rules, check whether its money is in the loan.

Would you like to see these rules at work?

A pack shows how one loan measures up against every test on this page. To see one, register your interest and our Funding Manager will contact you, with no obligation to go further.