High yield investment in New Zealand: how secured loans earn 12% to 18% p.a.

For a high yield investment in NZ secured over property, co-funding HomeSec’s short term loans pays 12% to 18% p.a., with each loan’s rate disclosed in its pack before you commit. The premium comes from established businesses paying for a fast decision and a loan measured in months, not from lending to people the banks have turned away.

HomeSec Business Finance, a private business lender lending since 2004, with its New Zealand office in Auckland, funds most of its loans from its own balance sheet. On some, it invites wholesale investors to lend alongside it, and it keeps its own money in every loan it offers. The rates and figures below are as at late September 2026.

How does 12% to 18% compare with a term deposit today?

Deposit income has shrunk since 2024. The Official Cash Rate sat at 5.50% until August 2024, then the Reserve Bank cut it step by step to 2.25% in November 2025, and deposit rates came down with it. Two rises since, in July and September 2026, have taken the OCR to 2.75%. A big-bank 12-month term deposit still pays only about 4%.

Inflation is the other half of the picture. The Reserve Bank reported inflation of 4.1% in the June 2026 quarter, driven by fuel prices, and said the OCR may need to rise further this year. An investor on the 33% tax rate keeps about 2.7% of a 4.05% deposit rate, so in real terms the money is losing ground.

The table compares income, not risk. Money held with a bank or other licensed deposit taker is covered by the Depositor Compensation Scheme up to $100,000 per depositor at each institution. A co-funded loan has no such cover. Its protection is the property, the equity above the debt and the lender’s process, which is why this guide spends as long on those as on the rate. For a wider set of options, see alternatives to term deposits.

What does the gap look like on NZ$250,000?

Take NZ$250,000 placed in one loan for six months. The sums below use simple interest before tax and fees, and assume the borrower repays on the due date. They illustrate the range only; the actual rate on any loan is in its pack. You decide how much to put into each loan, from NZ$100,000.

Even at the bottom of the range, the loan earns almost three times what the deposit does: NZ$9,937.50 more over the half year. Stretch both across twelve months and every figure doubles, to NZ$30,000, NZ$37,500 and NZ$45,000, against NZ$10,125 from the deposit.

Tax does not close the gap. Both amounts are taxed as income at your rate, so the loan keeps its lead in proportion. On the 33% rate, NZ$15,000 becomes about NZ$10,050 after tax, and NZ$5,062.50 becomes about NZ$3,392.

Who pays these rates, and why?

Mostly established New Zealand businesses that own property and need money quickly for a defined, short period. Picture a business owner who has agreed to buy the premises next door, with settlement three weeks away and a bank that will not finish its credit process in time. A loan that settles within days, and is repaid when the bank lending comes through, keeps the purchase alive.

Three things make that worth a premium to the borrower:

• Time. HomeSec can decide within hours, and settlement is possible within days.
• A short term. Loans usually run from one to 12 months, so the borrower pays for months, not years. NZ$400,000 at 15% p.a. for three months costs NZ$15,000 in interest, a modest price next to losing a property or a contract.
• Judgement rather than a template. A short term lender weighs the property, the business and the exit together, instead of applying rules designed for long home loans.

The banks leave room for this. Over the past three years, the Reserve Bank found, small New Zealand firms paid about 390 basis points over the 90-day rate for bank credit, against 280 for medium firms. Outright refusals were uncommon, under 5%, but smaller firms were more likely to be offered higher costs or terms they could not accept. In November 2025 the Reserve Bank described credit growth for smaller businesses as soft, with annual lending growth to small and medium firms negative. Our insight on how private credit returns are generated follows that interest from the borrower through to the investor.

What decides where a loan sits between 12% and 18%?

HomeSec prices each loan on its own facts, and rates generally follow risk. Anything that adds risk, or ties your money up for longer, tends to push the rate towards the top of the range.

Location matters more in New Zealand than a national average suggests. In June 2026 BNZ calculated that Auckland values were 22% below their 2021 peak in nominal terms, and Wellington’s 26% below, while Canterbury, Otago and Southland had reached new highs.

Because you choose each loan, you also choose your own mix. Some co-funders take only first mortgages; others accept second-ranking positions for a higher rate. How private mortgage investment works explains the steps from pack to settlement.

What do you give up for the higher rate?

Three things, and they deserve an honest weighing.

Access. Your money is lent for the term. If you need it back early, HomeSec will buy your share from you and repay the principal on request, but this is not an at-call account.

Spread. One loan is one borrower and one property. A fund spreads risk across many loans; with co-funding you build your own spread, loan by loan.

Certainty of timing. If a borrower does not repay, recovery runs through the Property Law Act 2007. The default notice must allow at least 20 working days to put things right before a mortgagee sale, and the selling mortgagee must take reasonable care to obtain the best price reasonably obtainable. That process takes time even when the equity is there.

Against those sit HomeSec’s lending rules: residential LVRs capped at 80% (commercial lower), no construction or development loans, terms of a year or less, and HomeSec’s own money in every loan. Risks and protections covers each one.

Why is a direct loan’s return different from a mortgage fund’s?

A mortgage fund pays out an average. Borrowers’ interest goes into the pool, the manager’s fees and costs come out, and what is left is shared among investors whatever the individual loans are doing. You rarely see the rate any particular borrower pays.

A fund’s liquidity can also fail just when you need it. The Guardian Trust Mortgage Fund, holding $249 million for about 3,700 investors, froze in July 2008, and a wind-up was proposed six months later. That October, AXA froze three mortgage funds holding $225 million.

With co-funding, your rate is tied to one loan you have read about. It is written into a loan agreement in your name, and principal and interest are paid straight to your own bank account. At maturity the money comes back to you, not into a redemption queue. Direct mortgage investment vs pooled funds sets the two models side by side.

What will you actually earn over a year?

A loan’s rate applies only while your money is lent. Between loans it sits in your own account at whatever that account pays, so your return for the year depends on how much of the year your capital is working.

A simple example: NZ$250,000 lent at 15% p.a. for nine months of the year earns NZ$28,125 in loan interest. If the other three months are spent waiting, the year’s return from lending is 11.25%, plus whatever the cash earns in the gaps. Late repayment moves the numbers the other way. A loan that runs past maturity delays your principal, and occasionally a loan has to be enforced.

Some co-funders keep the gaps short by reviewing new packs as current loans near maturity. Others hold cash and wait for loans that suit them. HomeSec does not ask you to take any particular loan.

How is the interest taxed?

• GST: none. Lending money is a financial service and an exempt supply under the Goods and Services Tax Act 1985.
• Income tax: the interest is taxable income, and resident withholding tax applies at your RWT rate. For individuals the rates run from 10.5% to 39%; companies use 28%, 33% or 39%.
• Family trusts: trustee income has generally been taxed at 39% since 1 April 2024, or 33% where the trust’s net income for the year is $10,000 or less.
• Investors overseas: non-resident withholding tax generally applies, or the 2% approved issuer levy where the payer is registered for it.

Your accountant will confirm the position for you or your entity.

Is a double-digit return right for your capital?

It suits investors who want income secured by New Zealand property, are happy to read a pack and make their own call, and can leave money lent for one to 12 months at a time. It suits less well anyone who needs the money on call or wants no exposure to a single borrower.

HomeSec earns mostly when loans are repaid and invests alongside you in every one, so a loan that goes wrong costs HomeSec too. If you would like to see a real pack, with the rate, the property and the exit laid out, register your interest and our Funding Manager will contact you.