Who this is for
Mezzanine finance sits in a niche. It is usually considered by people who already have a project and a senior lender in mind, such as:
- Small developers who have a senior loan lined up but a gap between that loan and the equity they can contribute
- Owners with a project that stacks up on paper but who are short of cash for part of the cost
- Borrowers comparing a second mortgage against other ways of closing a gap, such as adding equity or a partner
- People who want the costs and risks explained plainly before they decide
Mezzanine finance Sydney: what it is and where it sits
Mezzanine finance Sydney developers ask about is funding that sits behind the main development loan. It is often secured by a second mortgage over the same property, or by other security, and it ranks behind the senior lender if things go wrong. Because the second lender is further back in the queue, the risk to that lender is higher, and that is reflected in the terms.
A second mortgage development loan is typically arranged for a short period and repaid from the sale of the completed project or a refinance. It is generally business or investment-purpose lending, which may be assessed and regulated differently from a consumer home loan.
The development equity gap
The development equity gap is the difference between what a senior lender will fund and what the whole project needs, after your own contribution. Senior lenders set their own limits, and those limits vary by lender and by project. When the gap is real, developers look at ways to close it.
Before reaching for more debt, it is worth asking whether the gap is telling you something. If the project only works with an extra layer of expensive funding, the margin for error may be thin. Our development feasibility guide explains how to test that.
Costs and risks, stated plainly
Second mortgage and mezzanine funding is generally more expensive than senior debt, and it carries more risk for you as the borrower. Points to understand before you go further:
- Higher cost: the extra layer of debt usually costs more than the senior loan, and fees can add to it. Ask for the full cost in writing.
- More debt on one project: if sales are slower or values are lower than planned, the shortfall can grow.
- Consent and priority: the senior lender is usually asked to agree to the second mortgage, and the terms between the lenders can restrict what you can do.
- Short terms and refinance risk: if the project runs late, you may need to extend or refinance under less favourable conditions.
- Security at risk: if repayments are missed, both lenders may have rights over the property, and other assets or guarantees may also be involved.
Because of these risks, take independent legal and accounting advice before signing anything.
Alternatives to weigh up first
Depending on the project, other options may be worth discussing with your advisers: bringing in more equity, a joint venture partner (see our family joint venture development finance page), reducing the scope of the project, or staging it. Related pages include development finance without presales and first-time developer finance.
Use our Sydney home loan calculators to see how extra debt and holding costs could affect the project, and see our small development finance and construction home loans pages for the wider picture.
How Mortgagefy helps
We explain how a gap-funding scenario may be viewed, and where a suitable option exists we match the project to Mortgagefy's lender panel and aggregator. Some scenarios are arranged through those channels; Mortgagefy does not fund loans itself, and we cannot promise an outcome. Suitability is assessed case by case, so ask us how your project would be treated.
Conditions apply. Lending criteria, fees, charges and eligibility apply and vary by lender and project. Not all applicants or projects will qualify. This is general information only and not credit or financial advice.
How it works: 4 steps
Look at the numbers
Share the budget, the senior loan you are considering and your own contribution so the gap is clear.
Test the alternatives
We talk through whether the gap can be closed another way before adding debt.
Match to the panel
Where suitable, the scenario is taken to lenders on our panel or aggregator's panel.
Review the terms
Read the full costs, priority and consent terms with your solicitor and accountant before you sign.
Ask us how your project would be treated
Free, no obligation. Answer a few questions and a broker will follow up. Suitability is assessed case by case.
Frequently asked questions
What is mezzanine finance Sydney developers use?
How does a second mortgage development loan work?
What is the development equity gap?
Is mezzanine funding more expensive?
Is this a consumer home loan?
Can Mortgagefy guarantee a lender will approve this?
General information, reviewed 1 October 2026. Policies, lender participation and requirements may change.
Confirm current requirements and lender participation directly with your chosen provider before applying.
Development lending is higher-risk. Get independent legal and accounting advice before you commit to any structure, contract or loan. Mortgagefy does not give legal, tax or planning advice; speak to your solicitor, accountant and council.
This information is general in nature. Policies vary by lender and change frequently. Confirm current requirements with your chosen provider and seek professional advice.
Conditions apply. Lending criteria, fees, charges and eligibility apply and vary by lender and project. Not all applicants or projects will qualify. This is general information only and not credit or financial advice.
Ask us how your funding gap would be treated
Talk to a Sydney broker about the costs, risks and alternatives before adding another layer of debt.
Conditions apply. Lending criteria, fees, charges and eligibility apply and vary by lender and project. Not all applicants or projects will qualify. This is general information only and not credit or financial advice.