Mortgage guide
What is mezzanine finance in property?
Mezzanine finance in property is a form of secondary funding that helps developers bridge the gap between their equity contribution and what their senior lender is willing to offer.
- Published
- 13 Apr 2026
- Last reviewed
- 8 Oct 2026
- Reading time
- 3 min
What is mezzanine finance in property?
Mezzanine finance in property is a form of secondary funding that helps developers bridge the gap between their equity contribution and what their senior lender is willing to offer. Sitting between senior debt (such as a traditional development loan) and the developer’s own funds, mezzanine finance is used to enhance overall leverage. It allows developers to secure higher loan-to-cost or loan-to-value ratios without needing to bring in outside investors or commit more personal capital.
This type of mezzanine property finance is particularly useful for property developers looking to maximise their return on equity, expand into more projects simultaneously, or deal with shortfalls when senior lenders limit the maximum they’re willing to lend. Because mezzanine finance carries a second legal charge behind the senior lender, it is considered subordinated debt, repaid only after the senior loan is settled, but before the developer’s profit is realised.
Key Features of Mezzanine Finance for Property
Mezzanine finance is designed to bridge the funding gap. For instance, when senior lenders offer only 60-70% Loan to Gross Development Value (LTGDV), a mezzanine loan can boost this up to 80-85% LTGDV or as high as 95% Loan to Cost (LTC). It typically involves rolled-up interest, meaning borrowers don’t make monthly repayments, instead, the interest accrues and is paid off when the project exits or refinances. This type of loan is secured with a second legal charge, and comes with higher interest rates (commonly in the 12%-20% range) due to the increased risk to the lender. It also involves additional legal work, as there’s a layered security structure between the senior and mezzanine lenders.
When Is Mezzanine Finance Used in Property?
- When a developer’s equity and senior loan combined still fall short of covering the full project cost.
- After planning permission has been granted mid-project, requiring extra funds to build the newly approved units.
- To rescue partially built schemes, especially if the original loan facility expired or ran out.
- To reduce upfront capital requirements, enabling developers to scale faster and work across multiple sites.
Pros and Cons of Mezzanine Property Finance
Pros:
- Boosts total funding without diluting ownership
- Allows developers to retain full control of their project
- Ideal for scaling and increasing development pipeline
Cons:
- Interest rates are significantly higher than senior debt
- Tighter covenants and monitoring from mezzanine lenders
- Adds complexity with second charge legal documentation
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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Mortgage secured after an affordability appeal
- Area:
- West Midlands
- Loan size:
- £92,000
Frequently asked questions
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.
How do non-doms finance UK property purchases?
Non-domiciled individuals, meaning UK residents whose permanent home for tax purposes is outside the United Kingdom, typically finance UK property through private banks. Private banks lend against income, investments, or assets held offshore. Mortgage borrowing can also carry tax planning implications for non-domiciled buyers, so lenders often require independent tax advice. Structures involving offshore companies or trusts are assessed individually.
What are the eligibility criteria for obtaining property finance with Mortgage Lane?
Eligibility varies by product. In general, lenders look at your financial position, your investment experience, the property value and the rental income the property can produce. We work with a wide range of investors, from experienced professionals to first-time buyers.
Who finances prime central London property purchases?
Prime central London property purchases are financed by private banks, specialist large loan lenders, and some mainstream lenders with dedicated large loan ranges. Private banks are prominent in prime central London because purchase prices frequently exceed high street lending limits and buyers often have complex or international income.
Which UK lenders offer the best property finance deals?
There is no single UK lender with the “best” property finance deals, as suitability depends on property type, loan purpose, risk, and timescale. High-street banks suit standard mortgages, while specialist and challenger lenders often provide better terms for bridging, commercial, refurbishment, or complex property finance.
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