Mezzanine Finance Calculator

Mezzanine finance is a secondary loan that sits behind the senior (first charge) debt, used to bridge the gap between senior lending and equity in property development. It typically carries higher interest rates (12-20%) because it is higher risk. Mezzanine lenders take a second charge on the property. Combined with senior debt, it can fund up to 90% of costs.

Interest rates are typically 12-20% per annum, with arrangement fees of 1.5-3% and exit fees of 1-2%. The total cost depends on the loan term, which is usually 12-24 months for development projects. Interest is often rolled up (added to the loan) rather than paid monthly, increasing the total cost.

Use mezzanine finance when you need to reduce the equity required for a development project. For example, if senior debt covers 65% of costs, mezzanine can cover another 20-25%, leaving you with just 10-15% equity contribution. This is particularly useful for scaling your portfolio or when cash is tied up in other projects.

Bridging loans are first-charge (senior) short-term loans, typically at 0.5-1.5% per month. Mezzanine is second-charge, sitting behind the senior lender, at higher rates. Bridging replaces your main mortgage; mezzanine supplements it. Mezzanine is specifically designed to reduce equity requirements in development finance.

Most mezzanine lenders require borrowers to be experienced property developers with a track record. They lend through SPVs (Special Purpose Vehicles) and require detailed development appraisals. First-time developers may struggle to access mezzanine finance. Some lenders require a minimum project size (e.g., GDV of £1 million+).