---
title: "What is mezzanine finance in property?"
description: "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."
url: "https://mortgagelane.com/guides/mezzanine-finance/what-is-mezzanine-finance-in-property"
site: "Mortgage Lane"
collection: "guides"
date: "2026-04-13"
author: "Written by an adviser at Mortgage Lane"
category: "Mortgage guide"
reviewed: "2026-10-08"
reading_time: "3 min"
byline: "Written by an adviser at Mortgage Lane"
author_credentials: "CeMAP · FCA authorised firm"
language: "en-GB"
robots: "index,follow"
---

# 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.

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.

[Mezzanine finance](https://mortgagelane.com/definitions?term=mezzanine-finance)

Development finance

Finance that sits between senior debt and the borrower’s equity in a project’s funding structure.

[Read the full definition of Mezzanine finance](https://mortgagelane.com/definitions?term=mezzanine-finance)

Back to overview

[Mezzanine Finance](https://mortgagelane.com/short-term-finance/mezzanine-finance)

Related definitions

[Mezzanine finance](https://mortgagelane.com/definitions#def-mezzanine-finance)

·

[Rolled-up interest](https://mortgagelane.com/definitions#def-rolled-up-interest)

## 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

## Talk it through with an adviser

Speak to a Mortgage Lane adviser about your circumstances and the next steps.

Published: 2026-04-13

Last reviewed: 2026-10-08

Source: https://mortgagelane.com/guides/mezzanine-finance/what-is-mezzanine-finance-in-property