Commercial Property Finance NZ: Buy, Refinance or Release Equity

How does commercial property finance work in NZ?

Commercial property finance is a loan secured by a registered mortgage over a non-residential property: a workshop, retail shop, office, warehouse, yard or mixed-use building. The mortgage is registered against the title through LINZ, and the lender relies on the property’s value as its main security.

People use it for four main jobs:

• Buying premises to run their own business from (owner-occupier).
• Buying an investment building with tenants paying rent.
• Refinancing an existing commercial loan, often when the bank won’t renew or wants it repaid.
• Releasing equity from a building they already own to fund the business.

LoansOne arranges fast, flexible private 1st mortgages and 2nd mortgages for business purposes from $20,000 to $500,000. No cash flow or financial records are needed, and bad credit is considered. That makes private lending a strong fit for smaller commercial properties, deposit top-ups, short-term refinances and equity release, especially when a bank is slow or has said no.

Can you buy commercial property with no deposit?

This is one of the most searched questions in commercial property, so here’s the straight answer: no lender will lend 100% of the price against the commercial building alone. Every lender wants a cushion of equity in case values fall or the property has to be sold.

What people mean by “no deposit” or “100% finance” is a structure where the deposit comes from equity in another property rather than cash. That other property becomes additional security.

Here’s how it typically works:

1. A lender takes a first mortgage over the commercial property you’re buying and funds most of the price.
2. A second lender takes a 2nd mortgage over your home or another property you own and funds the deposit, plus costs.
3. Your existing bank home loan stays in place, untouched.
4. Between the two loans, you’ve borrowed the full price, and each lender has enough security.

Illustrative example: a Whangārei mechanic has leased the same workshop for years and the landlord offers to sell. They don’t have the cash deposit, but their home has plenty of equity behind the bank mortgage. A second mortgage over the home funds the deposit and legal costs, and a first mortgage over the workshop covers the rest. They now pay off their own building instead of paying rent, with no cash out of pocket.

Want to see how much equity you might be able to use? Our equity calculator gives you a quick estimate.

Which commercial property loan suits your situation?

If you’re unsure which ranking suits you, our comparison of first vs second mortgages breaks down cost, speed and what each means for your title. For timing gaps between buying and selling, see business bridging loans.

What do lenders look at on a commercial property?

Commercial property is assessed differently from a house. A lender will want to understand:

• Use and zoning. A standard workshop or shop is easier to lend on than a highly specialised building with only a handful of possible buyers.
• Lease and tenant. For investments, the length of the lease, the tenant’s strength and whether the rent is at market levels.
• Vacancy. An empty building is harder to fund than a leased one, although private lenders are often more open to it.
• Building condition and seismic rating. Lenders will ask for the seismic rating, often expressed as a percentage of the New Building Standard (%NBS), and whether the building is listed as earthquake-prone.
• Location. A building in an established industrial area or busy retail strip is easier to sell, so easier to lend on.
• Title type. Freehold, unit title or leasehold land all affect how a lender views the security.

With private lending, the property does most of the talking. That’s why no cash flow or financial records are needed on our 1st and 2nd mortgages: the lender is relying on the bricks and mortar and your equity.

What if the bank won’t refinance your commercial property?

Banks review commercial loans regularly, and sometimes they decide not to renew. Common triggers include a tenant leaving, a lease nearing expiry, arrears with IRD, a dip in trading or a building issue flagged by a valuer.

A private first mortgage can repay the bank and give you breathing room to:

• find a new tenant or sign a lease renewal,
• get the accounts up to date,
• complete repairs or a seismic assessment,
• sell the property on your timetable rather than in a hurry.

Illustrative example: the owner of a two-tenancy retail building in Hastings has their bank loan come up for review just after one tenant moves out. The bank wants the loan reduced. A private first mortgage refinances the bank within days, and once the shop is re-let, the owner moves back to a bank on longer terms.

If the bank has already declined you, our guide on what to do when the bank declines your business loan walks you through the options.

How do you release equity from a commercial building?

If you own your premises and the bank loan has come down, or the property has gone up in value, you may have useful equity sitting there. A 2nd mortgage behind the bank’s first lets you use it without touching your existing bank loan.

Owners use this to:

• clear an IRD or GST debt before penalties and interest build further,
• buy new equipment or vehicles,
• fund a big contract or stock order,
• consolidate expensive short-term debts.

Because the lender is relying on the property, this can be arranged quickly, and bad credit is considered.

Should you buy your premises or keep leasing?

There’s no universal answer, but owning your premises suits some businesses better than others. It tends to make sense when:

• your business is settled in its location and unlikely to outgrow the building soon,
• the fit-out is expensive to move, such as a workshop with hoists or a commercial kitchen,
• you want control over the building rather than relying on a landlord’s renewal,
• you have equity in other property to help with the deposit.

Leasing keeps cash in the business and makes it easier to move. Many owners start by leasing, then buy once the business is established. Some set up a separate entity to own the building and lease it back to the trading business, which keeps the property and the business apart. Your accountant can advise on the right structure.

What do you need to apply for a commercial property loan?

Having these ready speeds things up considerably:

1. The property address and, if buying, the signed sale and purchase agreement.
2. Details of any existing mortgage on the property and roughly what’s owed.
3. Lease and tenancy details for tenanted buildings.
4. Any recent valuation, building report or seismic assessment.
5. Photo ID for each borrower and guarantor.
6. A short explanation of how the loan will be repaid or refinanced.

You won’t need financial statements for our private 1st and 2nd mortgages. If time is extremely tight and you need funds within days, a caveat loan is another option worth understanding.

How is commercial property finance priced?

Every loan is priced on your individual circumstances. The main factors are how much you’re borrowing relative to the property’s value, whether it’s a 1st or 2nd mortgage, the property type and its location, the lease position, the term, and your plan to repay or refinance. Lower loan-to-value and a standard, well-located building usually mean sharper pricing. We match you to the lender best suited to your property and work to get the sharpest rate available for your situation.

Next step

Whether you’re buying your own premises, refinancing away from a bank that won’t play ball or unlocking equity to grow, a fast decision can save the deal. It’s free, takes about 30 seconds and doesn’t mark your credit file. Apply in about 30 seconds or call 09-888 5252 to talk it through with an expert.