Second charge lending that sits behind your primary mortgage, unlocking additional equity for property investment and development projects.
Mezzanine finance is a form of second charge lending that allows you to access additional equity in your property without refinancing your existing first charge mortgage. This subordinate debt sits behind the primary lender and provides a flexible way to raise capital when remortgaging isn't suitable or cost-effective.
This type of finance is particularly valuable for property investors and developers who have equity locked in properties but don't want to disturb favourable existing mortgage arrangements—perhaps fixed rates with early repayment charges, or competitive rates that couldn't be replicated today.
Mezzanine finance fills the "equity gap" in the capital stack, allowing investors to participate in opportunities that would otherwise require more cash equity. While rates are higher than first charge lending (reflecting increased risk), the flexibility and speed often outweigh the cost differential.
Mezzanine sits behind senior debt in repayment priority. In default, the first charge lender is repaid first, then mezzanine. This subordinate position means higher risk, hence higher rates.
Most first charge lenders require notification of second charges. An intercreditor agreement may be needed defining the relationship between senior and mezzanine lenders.
Mezzanine can be serviced monthly, rolled up, or paid at maturity. For development, rolled-up interest is standard. For investment properties, serviced payments may be required.
Understanding the right scenarios ensures you're using this finance type strategically.
Bridge the gap between senior debt and full project costs, reducing cash equity required for development projects.
Extract equity from existing properties to fund deposits on new acquisitions without refinancing.
Release property equity for business purposes—stock purchase, expansion, working capital—without disrupting existing mortgages.
When locked into favourable fixed rates, access equity via second charge rather than triggering early repayment charges.
| Cost Component | Typical Range | Notes |
|---|---|---|
| Interest Rate | 0.75% - 1.5% monthly | Higher than first charge |
| Arrangement Fee | 1% - 3% | Added to loan typically |
| Valuation Fee | £500 - £2,000 | May use existing valuation |
| Legal Fees | £1,500 - £3,000 | Including intercreditor |
| First Charge Consent | £0 - £500 | Some lenders charge |
| Exit Fee | 0% - 1% | Many lenders don't charge |
Evaluate available equity considering existing first charge and target combined LTV.
Check existing mortgage terms for second charge restrictions and consent requirements.
Identify mezzanine lenders appropriate for your property type and loan purpose.
Submit application and obtain first charge lender consent if required.
Complete second charge registration and receive funds.
| Aspect | Mezzanine Finance | Alternative |
|---|---|---|
| Existing Mortgage | Stays in place | Refinancing replaces it |
| Speed | 2-4 weeks typical | Remortgage: 6-8 weeks |
| ERCs | Avoided completely | May trigger charges |
| Rate Protection | Existing rate preserved | New rate applies |
Mezzanine finance is a second charge loan that sits behind your existing mortgage, whereas remortgaging replaces your current mortgage entirely. Mezzanine finance allows you to access equity while keeping your existing mortgage intact - valuable if you have a competitive fixed rate, would face early repayment charges, or have a mortgage that couldn't be replicated today. However, mezzanine finance typically has higher rates than first charge lending.
In most cases, yes. The second charge lender will need to inform your first charge lender and may require their formal consent, though this is often a formality. Your existing mortgage agreement likely contains restrictions on further borrowing, so the second charge lender will check these terms. Some modern mortgages have standard consent clauses that allow second charges without formal permission.
Mezzanine finance costs include an arrangement fee (typically 1-3%), a valuation fee, legal fees for both you and the lender, and potentially a fee for registering the second charge. Interest rates are higher than first charge lending, typically ranging from 0.75% to 1.5% per month depending on LTV, term, and loan purpose. You'll maintain costs on both your first and second charge loans.
Mezzanine finance can be used for most property-related purposes including purchasing additional properties, funding development or refurbishment projects, raising business capital, or consolidating debts. However, lenders will want to understand how the funds will be used and may have restrictions. Personal use or high-risk ventures may face more limited options or higher rates.
Mezzanine is a second charge behind your existing mortgage, which stays in place. Remortgaging replaces your mortgage entirely. Mezzanine preserves existing terms, avoids ERCs, and is often faster—but carries higher rates reflecting subordinate position.
Usually yes. Most mortgages restrict further borrowing. Your existing lender will need to consent, though this is often a formality. The second charge lender handles this process as part of their standard procedures.
Arrangement fee 1-3%, valuation, legal fees for both you and lender, potentially first charge consent fee. Interest rates 0.75-1.5% monthly—higher than first charge. You maintain costs on both charges simultaneously.
Most property-related purposes: purchasing additional properties, development funding, business capital, debt consolidation. Lenders want to understand fund usage and may restrict high-risk ventures.
Dedicated mezzanine finance specialists with deep market knowledge.
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Adhering to strict professional and ethical standards.
Proven track record in property finance.
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