Private mortgage business loans: using property to move fast

How does a private mortgage business loan work?

The mechanics are simple. A private or non-bank lender advances money to your business, and in return takes a registered mortgage over a property — yours, your company’s or a supportive family member’s. The property can be residential or commercial. If it already has a bank mortgage, the private lender usually sits behind it as a second mortgage. If it’s unencumbered, the private loan can be a first mortgage.

Because the property is doing most of the work, the lender’s questions shift. Instead of “do your last two years of financials meet our credit policy?” the main questions become “is there enough equity?” and “how will this be repaid?”. That’s why private property lending is often the fastest route to larger sums and the most forgiving of credit problems.

How fast is it, and how much can you borrow?

Amounts from $20,000 to $5,000,000 are possible. On timing:

• $20k to $250k is possible the same day where the title is simple, the loan-to-value ratio is comfortable and identity checks are straightforward.
• Up to $5m is possible within 24 to 48 hours for well-prepared deals.
• Complex deals — trust-owned property, several owners, existing caveats, rural or unusual properties — take longer.

How much you can borrow depends mainly on the property’s value, what’s already owed against it and the lender’s maximum loan-to-value ratio. The property borrowing calculator gives you a rough feel for your available equity before you apply.

How does it compare with the alternatives?

	Private mortgage	Bank business loan	Unsecured loan
Speed	Possible same day for $20k–$250k	Often weeks	Same day possible for smaller amounts
Size	$20k to $5m	Large	Typically $5k to $500k
Credit history	Case by case	Strict	Moderately flexible
Paperwork	Light to moderate	Heavy	Bank statements
Cost	Higher than a bank	Usually lowest	Often higher still for small, short loans
Term	Usually short	Longer	Short to medium
Risk to you	Property at stake	Property usually at stake	Personal guarantee

For a deeper look at the choice between a bank and a private lender, read bank vs private lender. If you’re deciding which position to take on the title, see first vs second mortgage.

What do people use it for?

• Clearing Inland Revenue debt to stop penalties and enforcement.
• Funding a large contract before the first progress payment.
• Buying stock or equipment in bulk at a discount.
• Settling on a commercial property when bank finance is running late.
• Buying out a business partner.
• Refinancing several expensive short-term debts into one.

Illustrative example. A Queenstown hospitality group needs $1.2 million within two days to settle on a neighbouring site after its bank’s approval stalls. The group owns two commercial properties with modest lending. A private first mortgage over one of them, possible within 24 to 48 hours, covers the settlement, with the plan to refinance to the bank once its credit process finishes. The cost of the private loan for a few months is weighed against losing the site altogether.

What do private lenders look at?

Private property lenders still assess — they just assess different things. In rough order of importance:

1. Equity. The property’s value minus everything already secured on it. More equity means a more comfortable lender and usually a faster yes.
2. The property itself. Standard houses and commercial units in towns and cities are easiest. Lifestyle blocks, leasehold land, specialised buildings and remote properties can take longer to value and may attract lower loan-to-value limits.
3. The exit. A specific, believable repayment plan is often the deciding factor.
4. The purpose. Business purposes only. Lenders want to understand what the money does and why it helps.
5. The people. Identity, credit history and any past insolvency. Bad credit and Inland Revenue debt are considered case by case rather than ruled out.
6. Serviceability. For longer terms or monthly-repayment structures, lenders check the business can carry the repayments in the meantime.

Because the list starts with the property rather than with your financial statements, private lending can work for businesses a bank won’t consider — a recent loss, overdue returns, a tax debt, a credit default or a business that’s simply too new.

First mortgage or second?

If the property has no existing lending, a private first mortgage is straightforward and usually cheaper than a second. If there’s a bank mortgage you want to keep — perhaps on a good long-term rate — a second mortgage leaves it untouched. Sometimes it makes sense to refinance the bank out entirely and take a larger private first mortgage, particularly when the bank is also part of the problem. There’s no one answer; it depends on the costs of each path and how long you’ll need the money. Our second mortgage page covers the “leave the bank alone” option in detail.

What should you plan before you sign?

The exit. Private property loans are generally short-term. Before you sign, write down exactly how it will be repaid: a bank refinance (and what needs to happen first), a sale, a specific receivable, or trading profits. Lenders will ask; you should know the answer cold.

Everyone on the title. If the property is jointly owned or held in a trust, every owner or trustee needs to understand and sign. Independent legal advice is common and sensible.

Total cost in dollars. Ask for the full cost — establishment fees, legal fees, interest over the expected term and any early repayment terms — as a dollar figure you can compare. Our guide on comparing fast loan quotes shows how.

Director duties. The Companies Office reminds directors not to commit the company to obligations unless they reasonably believe it can meet them. Using property to fund a business that’s fundamentally losing money is a risk worth talking through with your accountant.

Got property and a deadline? Find out what’s possible today.

See what your property could unlock

A short application is all it takes to find out. There’s no credit check when you first enquire, and we don’t shop your details around a dozen lenders — one specialist looks at your property, your purpose and your timing and calls you with a straight view. Please give us accurate property details, including who owns it and what’s owed on it; that’s what lets us tell you on the first call whether same-day, 48-hour or a slower route is realistic. Apply in 60 seconds.