Mortgage guide
What is an example of a mezzanine financing?
A developer is building a block of 10 flats with a total development cost of £2 million and a projected Gross Development Value (GDV) of £2.8 million once complete.
- Published
- 13 Apr 2026
- Last reviewed
- 8 Oct 2026
- Reading time
- 2 min
What is an example of a mezzanine financing?
A developer is building a block of 10 flats with a total development cost of £2 million and a projected Gross Development Value (GDV) of £2.8 million once complete.
A senior lender agrees to fund 70% of the GDV, offering a £1.96 million loan.
The developer only has £200,000 in personal capital.
This leaves a shortfall of £400,000 needed to cover the build costs and complete the project.
To bridge that gap, the developer secures mezzanine finance of £400,000 from a specialist lender. This mezzanine loan sits behind the senior loan, secured with a second legal charge on the property.
The mezzanine lender charges a higher interest rate, say 15% per annum, but rolls up the interest (i.e. it’s paid at the end).
When the development is sold, the senior loan is repaid first, followed by the mezzanine lender, and the developer keeps the remaining profit.
Why use mezzanine finance?
It allows the developer to:
- Keep full ownership and control
- Increase funding to 85-90% of GDV or up to 95% LTC (Loan to Cost)
- Avoid bringing in equity partners or giving up profit share
This example shows how mezzanine debt financing helps developers access higher leverage without selling equity or refinancing their entire facility.
Development finance calculator
Mezzanine financing criteria
For context, these are the wider product terms covered by this guide. Availability and eligibility depend on your circumstances and the lender.
| Criteria | Detail |
|---|---|
| Borrowers | Personal, Ltd co, LLP, Trusts, Offshore Trusts |
| Term | Max 24 months |
| Max Applicants | 6 |
| Loan to Gross Development Value (LTGDV) | Max 75% |
| Loan to Cost (LTC) | Up to 95% |
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- Area:
- West Midlands
- Loan size:
- £92,000
Frequently asked questions
What is a second charge mortgage example?
An example of a second charge mortgage is where a homeowner with a £200,000 first mortgage on a £300,000 property borrows an additional £30,000 secured against the same property. The new lender registers a second legal charge, ranking behind the original lender.
What is a family springboard mortgage example?
On an illustrative £200,000 purchase, a family member places £20,000 in the lender's account as security and the buyer borrows £200,000 with no deposit, paying about £1,098 a month over 30 years at an illustrative 5.2%. After the holding period the £20,000 is returned with interest if payments have been maintained.
What is the difference between joint venture finance and mezzanine finance?
Mezzanine finance is a second-charge loan that takes total funding above the senior lender's ceiling for a higher interest rate and sometimes a profit kicker. Joint venture finance is equity that replaces the developer's contribution entirely, in exchange for a share of profit. Mezzanine is repaid as debt; a joint venture is paid from the outcome.
What documents do I need to apply for a mortgage with Mortgage Lane?
You will usually need proof of identity, proof of income, bank statements and details of the property you are buying or investing in. The exact requirements depend on the mortgage product and your circumstances.
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