Glossary

Private credit and mortgage investment glossary for New Zealand investors

Secured lending in New Zealand brings together land law, FMC Act rules and tax terms. This glossary explains the ones an investor meets in a loan pack or a fund offer, one sentence each.

Reviewed by Catriona Anderson, Group General Manager Updated 26 September 2026 · 7 min read

This private credit and mortgage investment glossary for NZ explains, in a sentence each, the words you will see on a secured loan offer here: Record of Title and LINZ, LVR and priority, default notices and mortgagee sales, eligible investor certificates, RWT and the trustee tax rate, and the fund terms behind a redemption freeze.

It is written by HomeSec Business Finance, a private business lender lending since 2004, with its New Zealand office in Auckland. The A-to-Z list sits further down. Before it, the sections below group the terms by the question they help you answer, starting with the handful of words that marketing tends to stretch.

Which terms get used loosely?

Some words carry more weight in an advertisement than they do in a loan document. Four are worth pinning down before you read any offer.

Secured. Security is only as good as the property behind it, the debt ranking ahead and the lender’s ability to enforce. Ask what the security is, not simply whether there is some.
First mortgage. Ranking tells you who is repaid first, not how good the property is. A first mortgage over a half-built development is a very different proposition from one over an established Hamilton home.
Direct. Some offers called direct still pool your money or hold the security in another party’s name. Direct should mean your own name on the Record of Title.
Wholesale. This is a legal category, not a badge of quality. Wholesale offers come with less disclosure, not more protection.

How do private credit, pooled funds and direct mortgage investment differ?

Private credit covers any lending done outside the banks. In New Zealand the gap it fills is real: University of Auckland research found business loans made up only 18% of bank lending in 2024, compared with 30% across the Tasman. Banks still ask smaller firms for property security and personal guarantees, so established businesses with equity often look to private lenders when they need speed.

There are three common ways to take part. A pooled mortgage fund, normally structured as a managed investment scheme, issues you units while the manager picks the loans, and the FMA requires the manager of a registered scheme to be licensed and to appoint a licensed supervisor. A contributory mortgage gives you a slice of one identified loan, with a nominee or custodian usually holding the security; lawyers’ nominee companies arranged many of these until their exemption ended in 2016. Co-funding with HomeSec is direct mortgage investment: your own name is on the mortgage, beside HomeSec’s, and HomeSec’s money is in the same loan.

Those structural choices decide what you actually own, how much you can see and how your money comes back. Direct mortgage investment vs pooled funds compares them in a table.

What protects a lender if a loan goes wrong?

Every security term comes back to one issue: how much room is there between the debt and what the property would sell for?

New Zealand’s land register is kept by LINZ. Each property has a Record of Title that lists its registered owners along with mortgages, easements and covenants. A registered mortgage is entered on that record. When more than one lender holds security over the same land, priority sets the order of repayment, with the first mortgage paid before the second mortgage.

A caveat gives less. Lodged under the Land Transfer Act 2017, it puts others on notice of a claimed interest and blocks later dealings from being registered, yet it does not create a registered interest in the land.

Value comes next. A registered valuation establishes what the property is worth, the LVR compares the total debt with that figure, and the equity buffer is the difference: the number that does more than any other to protect a lender. HomeSec lends no more than 80% of value on residential property, and less on commercial. First and second mortgage investments walks through how ranking and LVR combine.

What happens, step by step, when a borrower defaults?

Each loan starts with an exit strategy, the expected way it will be repaid at loan maturity: selling a property, refinancing, or cash from the business. Once the loan is repaid, the mortgage comes off the title by discharge.

When payments are missed, default interest normally runs on the overdue amount. Enforcement then follows the Property Law Act 2007. The mortgagee serves a default notice on the mortgagor, allowing not less than 20 working days to put the default right, or 60 working days in some cases. If the notice expires with nothing fixed, the mortgagee may move to a mortgagee sale, and in selling must take reasonable care to obtain the best price reasonably obtainable at the time. At HomeSec, specialist lawyers run the process, and HomeSec’s own money sits in the same loan. What happens if a borrower defaults sets out the stages.

How do you get money back from a fund, compared with a loan?

Leaving a pooled fund means a redemption: the manager buys back or cancels your units, paying from the fund’s cash. If too many unitholders ask at once, the manager can impose a redemption freeze, or gating. The root cause is usually a liquidity mismatch between the access investors were promised and the time the loans take to repay. New Zealanders saw this in July 2008, when the Guardian Trust Mortgage Fund, with $249 million from about 3,700 investors, froze and later faced a wind-up.

A directly held loan has no queue. It repays on its maturity date into your own bank account, and if you need out sooner, an early buy-out has HomeSec purchase your share and hand back your principal. For the fund side in more detail, read what is a redemption freeze.

Which legal terms decide who can invest?

HomeSec’s co-funding is offered to wholesale investors as defined in Schedule 1 of the Financial Markets Conduct Act 2013. Wholesale offers come without a product disclosure statement, one of several retail protections set aside for this group.

Most co-funders qualify as an eligible investor, providing an eligible investor certificate that a financial adviser, qualified statutory accountant or lawyer confirms in writing. Others fit the investment activity criteria or count as a large investor, and can record their category in a safe harbour certificate. Each certificate is valid for two years. A separate minimum-investment exclusion covers anyone paying at least $750,000 for an offer. That $750,000 figure is a legal eligibility test, not the amount you put into each loan; co-funders choose how much to contribute to each loan, from NZ$100,000.

The FMA checks that certificates stand up. In October 2022 it formally warned seven wholesale property firms, Du Val entities among them, over invalid certificates, rejecting grounds such as simply owning KiwiSaver or holding term deposits. Our page for wholesale investors explains each route.

What tax terms apply to interest income?

Interest paid to a New Zealand resident has RWT deducted at the rate that fits the recipient, from 10.5% to 39%, and anyone who hasn’t supplied an IRD number faces the 45% non-declaration rate. For non-residents, NRWT generally applies, or a 2% approved issuer levy where the payer is registered as an approved issuer. Because lending money is an exempt supply, no GST is added to interest. Your accountant will confirm how each of these applies to you.

Trusts carry extra rules. The Trusts Act 2019 imposes a prudent investment duty, and a trust whose net income tops $10,000 a year pays the 39% trustee tax rate on retained income.

Which benchmarks and bank rules should you know?

The usual yardstick is a term deposit, priced off the Reserve Bank’s OCR, which stood at 2.75% in September 2026. Money with a licensed deposit taker is protected to $100,000 by the Depositor Compensation Scheme; investments are outside it.

History matters too. From 2006 to 2012, 51 finance companies went into receivership or liquidation or froze payments, most of them funded through debentures, and in 2024 Du Val Group was placed in statutory management.

The RBNZ also limits riskier bank lending. Under its LVR restrictions, since December 2025 banks can write up to 25% of new owner-occupier loans above an 80% LVR and 10% of investor loans above 70%, settings left unchanged in August 2026. DTI limits, in place since July 2024, cap the share of new bank mortgages above six or seven times income, and the Reserve Bank notes they bind banks only. Both shape who a bank can lend to, and how quickly. Business and investment lending, meanwhile, sits outside most of the CCCFA, keeping only its protection against oppressive behaviour. Every HomeSec loan comes with a due diligence pack, where these terms stop being abstract and attach to an actual property and borrower.

How do these terms look on a real loan?

A definition is a starting point; a live loan pack shows how it works in practice. Register your interest and our Funding Manager will contact you with the details.

A–Z of terms

Approved issuer levy: The approved issuer levy is a 2% levy that a payer registered as an approved issuer can pay on interest to a non-resident instead of deducting non-resident withholding tax.
Caveat: A caveat, lodged against a Record of Title under the Land Transfer Act 2017 by someone claiming an interest in the land, blocks later dealings from being registered until it is withdrawn or removed, but does not itself give a registered interest.
Co-funding: Co-funding means several lenders fund one loan together, each registered on the security for their own portion; at HomeSec, investors lend next to HomeSec's own capital in every co-funded loan.
Contributory mortgage: A contributory mortgage is one loan funded by several investors, each entitled to a share of its interest and principal, with the security usually held by a nominee company or custodian on their behalf.
Credit Contracts and Consumer Finance Act (CCCFA): The CCCFA is the law protecting borrowers of consumer credit; for business or investment lending, only its protections against oppressive lender behaviour apply.
Debenture: A debenture is a debt security in which an investor lends money to a company for a set term and interest rate, with repayment depending on the company rather than any loan the investor chose.
Default interest: Default interest is an increased rate charged on overdue amounts once a borrower has broken the loan terms.
Default notice: A default notice is the notice a mortgagee must serve under the Property Law Act 2007 before selling, giving the borrower not less than 20 working days, or 60 in some cases, to remedy the default.
Depositor Compensation Scheme: The Depositor Compensation Scheme protects up to $100,000 per depositor at each licensed deposit taker in standard accounts such as term deposits, from 1 July 2025, and does not cover investments.
Direct mortgage investment: Direct mortgage investment is putting your money into one secured loan you have picked yourself, with the loan documents in your own name and your share recorded on the mortgage.
Discharge: A discharge is registered through LINZ to take a mortgage off the Record of Title after the loan behind it has been fully repaid.
DTI (debt-to-income) limits: DTI limits are Reserve Bank rules, in force from 1 July 2024, that limit to 20% the share of new bank mortgage lending to owner-occupiers borrowing more than six times their income, or investors more than seven times; they apply only to banks.
Due diligence pack: A due diligence pack is the document set HomeSec emails investors for every loan, covering the property, LVR, borrower, purpose, term, rate, exit and risks so they can assess it themselves.
Early buy-out: An early buy-out is HomeSec taking over an investor's share of a loan before it matures and returning their principal, letting the investor leave the loan on request.
Eligible investor: An eligible investor is a person who certifies in writing that their previous experience with financial products lets them assess an offer's merits, their own information needs and the adequacy of the information provided.
Eligible investor certificate: An eligible investor certificate is the written certification an eligible investor gives, stating the grounds for it, which must be confirmed in writing by a financial adviser, qualified statutory accountant or lawyer, and is valid for two years.
Equity buffer: The equity buffer is the part of a property's value not taken up by secured debt; a fall in price, selling costs and unpaid interest eat into it first, before any lender loses capital.
Exempt supply (GST): An exempt supply is a supply on which no GST is charged; financial services, including lending money and paying interest, are exempt, so interest carries no GST.
Exit strategy: An exit strategy is how a loan is expected to be paid off when it falls due, for example by selling a property, refinancing with a bank or using business income.
Finance company: A finance company is a non-bank lender that funds its loans by borrowing from the public, historically through debentures; 51 New Zealand finance companies failed or froze payments between 2006 and 2012.
Financial Markets Conduct Act 2013 (FMC Act): The Financial Markets Conduct Act 2013 is the main New Zealand law governing offers of financial products, and its Schedule 1 sets out who counts as a wholesale investor.
First mortgage: The first mortgage sits at the front of the queue: when the property is sold, it is paid out before any other mortgage.
FMA: The Financial Markets Authority (Te Mana Tātai Hokohoko) is New Zealand's regulator of financial markets, financial products and, since 1 July 2026, consumer credit.
Investment activity criteria: The investment activity criteria make a person a wholesale investor if they held at least $1 million of specified financial products, or acquired at least $1 million of them, in the past two years, or for individuals, took a material part in an investment business's decisions for two years within the last ten.
IRD number: An IRD number is the tax number Inland Revenue issues to people and entities; interest paid to someone who has not provided one is taxed at the 45% non-declaration rate.
KiwiSaver: KiwiSaver is New Zealand's voluntary work-based savings scheme; it is not covered by the Depositor Compensation Scheme, and owning it is not on its own grounds for an eligible investor certificate.
Large investor: A large investor is a wholesale investor whose net assets or consolidated turnover exceeded $5 million at the end of each of its last two completed financial years.
Licensed deposit taker: A licensed deposit taker is a bank, credit union, building society or finance company licensed to take deposits from the public in New Zealand.
LINZ: Land Information New Zealand (Toitū Te Whenua) is the government agency that runs the land register, where ownership, mortgages and caveats are recorded.
Liquidity mismatch: A liquidity mismatch arises when a fund lets investors withdraw faster than its loans or other assets can be turned back into cash.
Loan maturity: Loan maturity is the end of a loan's agreed term, when the borrower must repay the principal together with any interest still owing.
LVR (loan-to-value ratio): The loan-to-value ratio compares all the debt secured on a property, counting any that ranks ahead, with the property's value, shown as a percentage.
LVR restrictions: LVR restrictions are Reserve Bank limits on how much new bank lending can be at high LVRs; since December 2025, 25% of owner-occupier lending may be above 80% and 10% of investor lending above 70%.
Managed investment scheme: A managed investment scheme pools investors' money for someone else to manage; a registered scheme offered to the public needs an FMA-licensed manager and a licensed supervisor.
Minimum-investment exclusion ($750,000): The minimum-investment exclusion treats someone as a wholesale investor for an offer where they pay at least $750,000 for the products, after receiving a prescribed warning. That $750,000 figure is a legal eligibility test, not the amount you put into each loan; co-funders choose how much to contribute to each loan, from NZ$100,000.
Mortgagee and mortgagor: The mortgagee is the lender that holds the mortgage, and the mortgagor is the property owner who has granted it as security.
Mortgagee sale: A mortgagee sale is a lender selling the mortgaged property once a default notice has run out, with a legal duty to take reasonable care to get the best price reasonably obtainable at the time.
NRWT (non-resident withholding tax): Non-resident withholding tax is tax deducted from New Zealand interest paid to non-residents, generally 15% or a lower rate under a double tax agreement.
OCR (Official Cash Rate): The Official Cash Rate is the Reserve Bank's benchmark interest rate, which influences bank deposit and lending rates; it was 2.75% as at September 2026.
Pooled mortgage fund: A pooled mortgage fund gathers money from many investors into a single fund that the manager lends out across many loans; each investor holds units in the fund, not a stake in any identified loan.
Priority: Priority sets the queue among secured lenders when a property is sold; the first mortgagee is paid ahead of the second.
Private credit: Private credit is money lent outside the banking system and the listed bond market, by non-bank lenders, funds and private investors, typically to businesses and property owners.
Product disclosure statement (PDS): A product disclosure statement is the prescribed document setting out an investment's key features and risks for retail investors; wholesale investors do not receive one.
Property Law Act 2007: The Property Law Act 2007 is the New Zealand statute that governs mortgages over land, including the notices a lender must give and the duties it owes when selling a mortgaged property.
Prudent investment duty: The prudent investment duty in section 30 of the Trusts Act 2019 requires trustees to invest with the care and skill a prudent person of business would use managing the affairs of others.
RBNZ: The Reserve Bank of New Zealand (Te Pūtea Matua) is New Zealand's central bank, which sets the Official Cash Rate and regulates banks and other licensed deposit takers.
Record of Title: A Record of Title is the electronic land record, issued by Land Information New Zealand, that shows who owns a property and the mortgages, easements, covenants and other interests registered against it.
Redemption: A redemption is a unitholder cashing out of a fund, with the manager buying back or cancelling their units.
Redemption freeze (gating): A redemption freeze, also called gating, is a fund stopping or rationing withdrawals, leaving unitholders unable to take money out on the terms they signed up to.
Registered mortgage: A registered mortgage is security entered on a property's Record of Title through LINZ, which gives the lender a registered interest in the land for as long as the loan is owed.
Registered valuation: A registered valuation is an assessment of a property's current market value prepared by a registered valuer, often used to support lending decisions and mortgagee sales.
RWT (resident withholding tax): Resident withholding tax is tax deducted from interest paid to New Zealand residents, at a rate from 10.5% to 39% depending on the recipient's income or entity type.
Safe harbour certificate: A safe harbour certificate is a separate signed document in which an investor states which wholesale category applies to them, with a prescribed warning; it is valid for two years.
Second mortgage: The second mortgage sits behind the first over the same property, so it is paid from any sale only once the first mortgage has been cleared in full.
Statutory management: Statutory management is a process in which the Government appoints statutory managers to take control of a company or group in serious difficulty, as happened to Du Val Group in August 2024.
Supervisor: A supervisor is the independent licensed body that oversees a registered managed investment scheme, with scheme property held by the supervisor or an independent custodian on trust.
Term deposit: A term deposit is a sum lodged with a bank or other licensed deposit taker at an interest rate fixed for an agreed period.
Trustee tax rate: The trustee tax rate is the rate on income retained by a trust, 39% from 1 April 2024, or 33% where the trust's net income for the year is $10,000 or less.
Trusts Act 2019: The Trusts Act 2019 is the New Zealand law setting out trustees' duties and powers, including the power to invest in any property subject to the deed and the duty to invest prudently.
Wholesale investor: A wholesale investor is someone who falls within Schedule 1 of the FMC Act, for example as an investment business, under the investment activity or large tests, or as an eligible investor, and can be offered investments without retail disclosure.

Frequently asked questions

What is private credit in New Zealand?

Private credit is lending done outside the banks, by non-bank lenders, funds and private investors, usually to businesses and property owners. There is room for it here: business loans were only 18% of New Zealand bank lending in 2024. You can take part through a pooled fund, holding units, or directly, by lending into a specific secured loan you choose.

What is an eligible investor in NZ?

An eligible investor is one kind of wholesale investor under the Financial Markets Conduct Act 2013. The investor certifies in writing that their previous experience with financial products lets them assess an offer's merits and the adequacy of the information, states the grounds, and has the certificate confirmed in writing by a financial adviser, qualified statutory accountant or lawyer. It lasts two years.

What does LVR mean for a mortgage investor?

LVR, the loan-to-value ratio, compares every dollar of debt secured on a property, including anything ranking ahead, with the property's value. Lend NZ$700,000 against a home valued at NZ$1 million and the LVR is 70%. The lower that figure, the bigger the equity buffer standing between the lender and a loss if a sale is ever needed.

What is a mortgagee sale in NZ?

A mortgagee sale happens when a lender sells the security property after the borrower defaults. Under the Property Law Act 2007, the lender must first serve a default notice giving at least 20 working days to fix the default. When it sells, it must take reasonable care to obtain the best price reasonably obtainable at the time of sale.

Are private mortgage investments covered by the Depositor Compensation Scheme?

No. The scheme, running since 1 July 2025, protects up to $100,000 per depositor at each licensed deposit taker, for standard accounts such as term deposits. Investments sit outside it, so neither a mortgage fund nor a co-funded loan is covered. What protects a secured loan investor is the registered security, the LVR, a short term and how carefully the loan was assessed.

Sources

Figures are as at 26 September 2026 unless stated. This page is reviewed by Catriona Anderson, Group General Manager of HomeSec Business Finance, and updated as markets change.