Our lending rules: how we choose loans for investors

HomeSec chooses loans for investors using a fixed set of lending rules: business or investment purpose only, a registered first or second mortgage over Australian real estate, a maximum 80% LVR on residential property (lower on commercial), terms of 1 to 12 months and a clear exit. No construction, development or land banking. HomeSec’s own money goes into every loan.

These rules are not a marketing list. They are the credit policy HomeSec Business Finance, an Australian private lender founded in 2004, has applied to its own money since the beginning. When you co-fund a loan, you are relying on that discipline, so it is worth knowing exactly what it is.

What are HomeSec’s lending rules?

Every loan offered to investors has to meet all of these, not most of them.

Why only business or investment purpose loans?

Short term business lending secured by property is what HomeSec has done since 2004. Most borrowers are established, thriving businesses using the equity in property they already own. They pay a higher rate for speed and flexibility, not because they are weak.

A clear business or investment purpose also makes a loan easier to assess. You can see what the money is for, whether the amount makes sense, and how the business or asset will produce the funds to repay it. A loan with a vague purpose usually has a vague exit, and that is where problems start.

Why a registered first or second mortgage over Australian real estate?

Because real estate is security you can see, value and, if it ever comes to it, sell. A registered mortgage is recorded on the title, and every investor is named on it for their exact contribution, alongside HomeSec. Where a caveat is the security, the same principle applies.

On a first mortgage, your loan ranks first. On a second mortgage, it ranks behind an existing first mortgage, and the LVR is calculated on the total debt, including the loan ahead of you. Both are useful, and each loan’s pack makes the ranking clear. Our guide to investing in first and second mortgages explains how each position works in practice.

Why is the maximum LVR 80%?

The loan-to-value ratio (LVR) is the total secured debt as a percentage of the property’s value. A maximum of 80% on residential property means there is at least 20% equity between the loan and the property’s value. Commercial property is lent against at lower LVRs, because it can take longer to sell and values move differently.

That buffer matters. The deepest national falls in recent decades were about 8.4% in 2017–19 and about 7.6% during the GFC, according to Cotality (formerly CoreLogic) data reported by the ABC. Local markets can fall further, which is why the rule is a maximum, not a target. For a worked example, read LVR explained for mortgage investors.

Why are terms only 1 to 12 months?

Short terms reduce the time anything can go wrong. A property market can shift over three years; it is much less likely to shift sharply over six months. A borrower’s business is easier to assess over a short, defined period, and the exit is close enough to be concrete.

Short terms also keep you in control. Your capital comes back when each loan is repaid, and you decide afresh whether to fund the next one. There is no long lock-up, and nothing rolls over automatically.

What counts as a clear exit strategy?

An exit strategy is the planned way a loan will be repaid at maturity. The usual exits are:

• Sale of a property, where the borrower is selling an asset and needs funds in the meantime.
• Refinance, where the borrower is moving to a bank or other lender and needs time to complete it.
• Business proceeds, such as a contract payment, a business sale or a settlement due within the term.

HomeSec will not write a loan without a clear, credible exit, and the exit is set out in the pack so you can judge it yourself. As maturity approaches, HomeSec manages the borrower’s exit day to day. You do not have to chase anyone.

Why we don’t fund construction or development loans

This is the rule that most separates HomeSec from much of the private credit market. More than half of Australian private credit is real-estate debt, mostly lending to developers, according to Livewire. HomeSec does none of it.

The reasons are practical:

• The security is unfinished. A partly built project is hard to value and hard to sell. Its worth depends on someone finishing it.
• Costs can blow out. Construction costs are now around 51% above pre-COVID levels, according to the National Housing Supply and Affordability Council. Every overrun eats into the equity that was meant to protect the lender.
• Timelines stretch. Planning delays, builder problems and weather push completion out. Loans that were meant to run for months end up running for years.
• The exit depends on a market that may have moved. A project priced for one market can be finished into a very different one.

The collapse of Sydney developer Bathla Group in August 2026 showed how this plays out. The parent group had around $3.2 billion in liabilities, mostly owed to private credit, with exposure concentrated in construction, land and unsold-stock loans, as reported by Financial Standard. We cover it in detail in what the Bathla collapse means for private credit.

HomeSec lends against completed real estate that it can value today and sell if it must. That is a narrower market, and a deliberately narrow one.

Loans we say no to

Saying no is a large part of the job. HomeSec declines loans that:

• Fund construction or building works of any kind.
• Fund property development, subdivision or off-the-plan projects.
• Fund land banking, where land is held for rezoning or future development.
• Are secured by unusual, highly specialised or remote property with a thin pool of buyers.
• Are secured by anything that would take a long time to sell.
• Exceed 80% LVR on residential property, or the lower limits on commercial property.
• Run longer than 12 months.
• Lack a clear, credible exit.
• Are for personal or household purposes rather than a business or investment purpose.
• Are secured by property outside Australia.

A loan that fails any of these is not offered to investors, however attractive the rate.

What does the 50-point due diligence checklist cover?

Every loan is assessed against the same 50-point checklist before it is offered. It is built around the questions a careful lender asks: the property, its value and title; the LVR, including any debt ranking ahead; the borrower and their business; the purpose; the term and rate; and the exit.

The result becomes the due diligence pack emailed to you. It is the same information HomeSec relies on when it commits its own money, and each loan’s risks are set out in its pack. Our guide to how co-funding works, step by step shows where the pack fits in the process.

Who decides, and whose money is in the loan?

Both joint CEOs, Paul Stone (founder) and Jason Brockmuller (credit policy), are involved in every loan decision. General Manager Catriona Anderson signs off every credit decision. Paul founded HomeSec in 2004; Catriona has been with the business since 2005 and Jason since 2008.

Then HomeSec puts its own money in. It co-invests in every loan it offers to investors, often on a 50/50 basis, on the same security and the same terms as you. It also earns mostly when loans are repaid, not when they are written. That is the simplest test of whether a lender believes in its own rules.

Want to see the rules applied to a real loan?

The clearest way to understand these rules is to see them in a pack. If you’d like to see how a loan measures up, register your interest and our Funding Manager will be in touch.