How much you can borrow against your property depends on its current market value, the debt already secured on it and the lender's maximum loan-to-value ratio (LVR). Usable equity is the maximum lending allowed minus existing mortgages. fundU lends $20,000 to $1m to New Zealand businesses by first or second mortgage, assessing each property, purpose and exit case by case.
If you own property, how much you can borrow against it for your business comes down to three numbers: what the property is worth today, what is already owed on it, and how far a lender is prepared to lend against that value. Get those three right and you can work out a realistic figure in about five minutes, before you ever fill in a form. This guide walks through loan-to-value ratios, usable equity and the difference between first and second mortgage headroom, with worked New Zealand examples you can adapt to your own situation.
It matters because most Kiwi businesses are small. MBIE's 2026 factsheets show 97.2% of New Zealand enterprises have fewer than 20 employees, and the Reserve Bank's May 2026 Financial Stability Report notes smaller firms rely heavily on bank and non-bank lending and more often face tougher terms. For many owners, the property they already hold is the strongest card they have.
How much can I borrow against my property?
The short answer: multiply your property's current market value by the lender's maximum loan-to-value ratio, then subtract any mortgages already registered against it. The result is your usable equity, which is roughly the most a new lender could advance.
Everything else in this guide is detail on each part of that sum. The value you use has to be realistic. The maximum ratio varies with the property type, location and loan. And the existing debt needs to include everything secured on the title, not just the main bank mortgage.
What is LVR and why does it cap your borrowing?
Loan-to-value ratio (LVR) is the total lending secured on a property, shown as a percentage of the property's value. A $600,000 mortgage on a $1,000,000 property is an LVR of 60%.
Lenders cap LVR because they need a buffer. If a loan ever has to be repaid from a sale, the property has to cover selling costs, any drop in the market, interest that has built up and the time it takes to sell. The lower the LVR, the bigger that cushion.
| Property value | Total lending | LVR |
|---|---|---|
| $800,000 | $400,000 | 50% |
| $800,000 | $520,000 | 65% |
| $800,000 | $560,000 | 70% |
| $1,500,000 | $900,000 | 60% |
| $1,500,000 | $1,050,000 | 70% |
There's no single maximum LVR across the market. A well-located house in a main centre will usually support a higher ratio than vacant rural land or a specialised building with a small pool of buyers. The worked examples below use illustrative maximums so you can see the method. The figure a lender actually applies to your property is confirmed when they assess it.
How do you work out usable equity?
Equity is the gap between your property's value and what you owe on it. Usable equity is the part of that gap a lender will actually lend against, once it has applied its maximum LVR. Usable equity is always smaller than equity, and the difference catches many owners by surprise.
Follow these steps to estimate yours:
- Estimate today's market value. Use recent nearby sales of similar properties, not the price you paid or the figure you hope for.
- Pick a sensible maximum LVR. For a first estimate on a standard home or commercial unit, test a couple of ratios, such as 60% and 70%, to see the range.
- Multiply value by LVR. That gives the maximum total lending the property could support.
- Add up every debt secured on the title. Include the bank mortgage, any revolving credit or top-up facility, and anything else registered against it.
- Subtract total debt from maximum lending. What's left is your estimated usable equity.
- Sense-check the result against your need. If the gap is tight, look at adding a second property or reducing the amount you need.
A quick example: a property worth $900,000 at a 70% maximum supports $630,000 of total lending. With a $400,000 bank mortgage, usable equity is about $230,000. The owner's equity is $500,000, but only $230,000 of it is usable.
Worked examples: how much could you borrow?
The table below shows how the same method plays out for different owners. The maximum LVRs are illustrations only, chosen to show how property type and loan position change the answer.
| Property and situation | Market value | Existing debt | Illustrative max LVR | Max total lending | Usable equity (headroom) |
|---|---|---|---|---|---|
| Family home, Hamilton, bank mortgage stays (second mortgage) | $900,000 | $400,000 | 70% | $630,000 | $230,000 |
| Rental property, Tauranga, bank mortgage stays (second mortgage) | $750,000 | $480,000 | 70% | $525,000 | $45,000 |
| Freehold industrial unit, Christchurch (first mortgage) | $1,200,000 | Nil | 60% | $720,000 | $720,000 |
| Home, Auckland, bank refinanced out (first mortgage) | $1,400,000 | $600,000 | 70% | $980,000 | $380,000 new money |
| Lifestyle block, Waikato (first mortgage) | $1,100,000 | $250,000 | 55% | $605,000 | $355,000 |
A few things stand out:
- The Hamilton home has plenty of room behind the bank (our guide to using home equity for business covers this route in detail). A second mortgage of up to about $230,000 could fund the business while the existing home loan carries on untouched.
- The Tauranga rental looks like it has $270,000 of equity, yet only about $45,000 is usable. Borrowing against it alone may not meet a bigger need, but it could be combined with another property.
- The Christchurch industrial unit is unencumbered, so the full maximum is available as a first mortgage. A lower illustrative ratio has been used because specialised commercial property can take longer to sell.
- The Auckland home shows the refinance route. The new first mortgage repays the $600,000 bank loan and releases about $380,000 on top, keeping total lending within the $1m ceiling.
- The Waikato lifestyle block uses a lower ratio still, as land and lifestyle property is assessed case by case and the buyer pool can be narrower.
First mortgage vs second mortgage headroom: what's the difference?
A first mortgage is the loan that ranks first on the title and is repaid first from any sale. A second mortgage sits behind an existing first mortgage, usually your bank's, and is repaid after it. That ranking changes how much headroom each option offers.
| Question | First mortgage | Second mortgage |
|---|---|---|
| What happens to your bank loan? | Repaid and replaced, or the property was already unencumbered | Stays in place on its current terms |
| How is headroom measured? | Value × max LVR | (Value × max LVR) − existing first mortgage |
| Typical LVR approach | Can usually lend closer to the maximum | Often a more conservative limit on combined debt |
| Best suited to | Freehold property, or when the bank loan needs replacing anyway | Keeping a good bank loan while unlocking extra equity |
| Consent from existing lender | Not needed once they're repaid | Your bank's consent may be required under its mortgage terms |
In plain terms, a second mortgage is usually the faster, simpler way to borrow when your bank loan is sound and you only need a slice of the equity. A first mortgage suits properties with little or no debt, or situations where the bank loan is in arrears or about to expire and replacing it makes sense. Our guide to first vs second mortgage business loans goes deeper on choosing between them.
A second mortgage lender looks at the combined debt on the property, not just its own loan. Paying down a revolving credit facility on the first mortgage before you apply can lift your available headroom.
What value will a lender use for your property?
Lenders base the loan on current market value, which is what the property would sell for in a normal sale today. That is often different from the figures owners have to hand.
- Council rating valuation (RV or CV). Set for rates on a council cycle. It can lag well behind the market in either direction, so it's a rough starting point at best.
- Online estimates. Useful for a ballpark, but they can't see inside the property or allow for its condition.
- Purchase price. Only relevant if you bought very recently.
- Registered valuation. A valuation by a registered valuer, instructed for the lender, is the standard basis for a property-secured loan. It considers condition, zoning, comparable sales and how easily the property could be sold.
At fundU, our credit team can give an early indication based on the property details and recent sales, then confirm the final amount once a valuation is in hand. If the valuation comes in lower than expected, the loan amount is adjusted to match. It pays to be conservative in your own estimate so the numbers still work if that happens.
Which property types go further?
Different properties carry different levels of risk for a lender, mostly because some sell faster and more predictably than others. This affects the maximum LVR and sometimes the term.
| Property type | How lenders tend to view it |
|---|---|
| Residential home or rental in a main centre or large town | Broadest buyer pool; usually supports the highest LVR |
| Residential in a small or remote town | Considered, but often at a lower LVR |
| Commercial property such as shops and offices | Depends on location, tenancy and building condition |
| Industrial units and warehouses | Often strong where demand is solid; specialised buildings assessed carefully |
| Lifestyle blocks and land | Case by case, commonly at a lower LVR |
fundU lends against residential, commercial and industrial property across New Zealand, and some land and lifestyle property case by case; see where we lend for the regions we cover. Our secured business loans page explains the security we accept in more detail.
Can you combine properties or use a family member's property?
Yes, and it's one of the most effective ways to lift borrowing capacity. A lender can take security over two or more properties and assess the total usable equity across all of them.
Say the Tauranga rental above offers $45,000 of headroom and the owner's home offers another $150,000. Together they could support around $195,000, which may be enough where one alone is not.
Security doesn't have to be in your personal name. We can lend where the property is owned by your company, a family trust, or a supporting party such as a parent or sibling who agrees to act as guarantor. Each owner needs to understand the arrangement, and their lawyer will explain the documents before anything is signed. If a trust is involved, our guide to borrowing against family trust property covers what trustees need to know.
What else affects how much you can borrow?
Equity sets the ceiling, but it isn't the only factor. A lender also looks at whether the whole loan makes sense.
- The purpose. Loans are for business purposes only, such as paying IRD, buying stock, funding a contract or refinancing expensive debt.
- The exit. How the loan will be repaid, whether that's a property sale, a bank refinance, a contract payment or business cash flow. A clear exit can make a lender more comfortable at a given LVR.
- How interest is handled. If interest is capitalised rather than paid monthly, the balance grows over the term, so the lender leaves room for that within the LVR limit.
- The term. Short-to-medium-term loans need an exit that realistically lands inside the term.
- Loan size limits. fundU lends from $20,000 to $1m, so a very large equity position doesn't mean a larger loan than that.
- Your full story. Bad credit, IRD debt or a previous bank decline don't automatically rule you out. We consider the whole picture.
Example scenario
A Waikato engineering firm won a supply contract and needed around $280,000 for materials and extra labour before the first payment arrived. The director's home was worth about $1,050,000 with a $420,000 bank mortgage. At an illustrative 70% maximum, total lending of about $735,000 was possible, leaving roughly $315,000 of usable equity.
A second mortgage of $280,000 left the bank loan untouched and kept some headroom in reserve. Interest was capitalised, so no monthly repayments competed with wages during the contract, and the loan was set up to be repaid from the contract's final payment.
How can you increase the amount you can borrow?
If your first estimate falls short, there are practical ways to close the gap:
- Reduce existing secured debt. Paying off or cancelling an unused revolving facility can free up headroom.
- Add another property as security. Your own, your company's, your trust's or a supporting party's.
- Right-size the loan. Borrow what the purpose needs, with a sensible buffer, rather than the maximum.
- Strengthen the exit. A signed contract, a listing agreement or an accountant's letter supporting a refinance all help.
- Tidy the property's presentation. Condition affects valuation, so fix obvious maintenance before the valuer visits.
Key takeaways
- Borrowing capacity = (market value × maximum LVR) − existing secured debt.
- Usable equity is always smaller than your total equity.
- First mortgages usually offer the most headroom; second mortgages let you keep your bank loan.
- Lenders use current market value, typically confirmed by a registered valuer, not your council valuation.
- Combining properties or bringing in a supporting party's property can lift what you can borrow.
- Purpose and exit matter as much as equity.
Find out what your property could unlock
If you've run the numbers and think your property could fund the next step for your business, the quickest way to confirm it is to talk to a lender who decides in-house. fundU lends $20,000 to $1m against New Zealand property, by first or second mortgage, and our credit team assesses each application on its own merits. Take a look at how our fast second mortgages work, then see if you qualify. It takes a couple of minutes, doesn't affect your credit score, and a lending specialist will call you back to talk through the numbers. Prefer to talk now? Call 09 875 4577.
Frequently asked questions
How do I calculate the usable equity in my property?
Multiply the property's current market value by the lender's maximum loan-to-value ratio, then subtract everything already secured against it, such as your bank mortgage. What's left is your usable equity. For example, a property worth $900,000 at a 70% limit supports $630,000 of total lending; with a $400,000 mortgage, usable equity is $230,000.
Is usable equity the same as the equity in my property?
No. Equity is the full gap between the property's value and what you owe. Usable equity is smaller, because lenders only lend up to a set share of the value to leave a buffer for selling costs, market movements and interest. A property with $500,000 of equity might offer around half that as usable equity.
Can I borrow more with a first mortgage than a second mortgage?
Often, yes. A first mortgage lender is repaid first from a sale, so it can usually lend closer to its maximum loan-to-value ratio. A second mortgage lender ranks behind the bank, so it may apply a more conservative limit to the combined debt. The trade-off is that a second mortgage lets you keep your existing bank loan in place.
Will a lender use my council rating valuation?
Usually not on its own. A council rating valuation is set for rates on a fixed cycle and can be well above or below today's market. Most property-secured lenders rely on a current market valuation from a registered valuer, or their own assessment for a quick early indication, before confirming the final loan amount.
Can I use someone else's property to borrow more for my business?
Yes, in many cases. fundU can take security over property owned by your company, your family trust or a supporting party such as a family member who agrees to act as guarantor. Adding a second property can lift the total usable equity, as long as every owner understands and agrees to the arrangement.
A practical next step
Ready to see what's possible?
Tell us what the business needs, when you need it and what property is available. A fundU lending specialist will call you back to talk it through — enquiring is free and won't affect your credit score.