Calculator
Mezzanine cost calculator
The same funding gap can be closed with mezzanine debt at a fixed cost or with equity at a share of whatever profit emerges. This calculator prices both routes on your numbers and shows which is cheaper, and by how much.
The right answer depends on scheme risk, not just the headline cost. Send us the appraisal and we will price mezzanine and equity terms side by side.
A fixed cost against a variable one
Mezzanine finance is debt. Its cost is set the day you sign: interest at the agreed rate, accruing on the full balance from drawdown because mezzanine typically funds early costs such as the land, plus arrangement and exit fees. The calculator prices it exactly that way. On the defaults, a £400,000 gap at 14 per cent per annum over 18 months with 2 per cent combined fees costs £92,000, and that figure does not move whether the scheme makes £500,000 or £50,000. Mezzanine finance rates run 14 to 20 per cent per annum as of June 2026, reflecting the second-charge position behind the senior lender.
Equity is the opposite shape. The partner funding the same £400,000 takes a priority return on their cash, 10 per cent per annum on the defaults, then a percentage of the residual profit. On a £500,000 profit that is £60,000 of priority return plus 40 per cent of the remaining £440,000, £236,000 in total, more than two and a half times the mezzanine cost. Cut the profit to £150,000 and the equity route costs £96,000 while the mezzanine still costs £92,000: nearly line ball. Below that, equity is cheaper, because its cost scales with the outcome and mezzanine's does not.
The crossover, and how to use it
For any set of terms there is a profit level at which the two routes cost the same. Above it, mezzanine wins; below it, equity wins. The useful exercise is not to read the calculator once at your appraisal profit, but three times: at appraisal, at appraisal less 15 per cent, and at a genuine downside case. If mezzanine is cheaper in all three, the decision is straightforward. If the ranking flips in the downside case, you are not really comparing prices any more, you are deciding who carries the downside, which is the real question. The structural differences between the two instruments are set out in our guide to mezzanine versus equity.
Why scheme risk should change the answer
The headline comparison flatters mezzanine because it prices only the appraisal case. Mezzanine must be repaid regardless: it is a second charge, almost always supported by a personal guarantee, and its rolled interest accrues through every month of delay. A scheme that slips six months and sells 10 per cent under appraisal can leave the senior lender whole, the mezzanine repaid out of what would have been your profit, and the developer with nothing but the guarantee experience. An equity partner in the identical scenario takes a reduced return alongside you, because their money was never owed, only invested. How the second charge ranks against the senior facility, and what the intercreditor agreement controls, is covered in our guide to senior debt versus mezzanine debt.
The practical rule: the stronger and simpler the scheme, the more the fixed cost of mezzanine works in your favour; the more live the downside scenarios, the more the variable cost of equity is worth paying. Outputs here are illustrative, based on the stated rate, fee and waterfall assumptions, and are not a quote, an offer of finance or advice.
Frequently asked questions
How much does mezzanine finance cost on a development?
Mezzanine development finance prices at 14 to 20 per cent per annum as of June 2026, plus combined arrangement and exit fees of around 2 to 4 per cent of the facility. Interest typically accrues on the full balance from drawdown and rolls up to repayment. On a £400,000 facility at 14 per cent over 18 months with 2 per cent fees, the total cost is £92,000: £84,000 of rolled interest plus £8,000 of fees, payable whatever the scheme makes.
Is mezzanine cheaper than giving an equity partner a profit share?
On a scheme that performs to plan, usually yes. On the calculator's defaults, the mezzanine route costs £92,000 while an equity partner taking a 10 per cent priority return plus 40 per cent of residual profit on a £500,000 scheme would take £236,000. The comparison flips as profit falls: equity cost shrinks with the profit, while mezzanine cost is fixed. The honest comparison weighs both outcomes, not just the appraisal case.
What happens to mezzanine debt if the scheme makes no profit?
It must still be repaid in full, with its rolled interest and fees. Mezzanine is debt secured by a second charge, not a profit share, so a scheme that breaks even on paper can leave the developer personally exposed for the mezzanine balance, usually backed by a personal guarantee. An equity partner in the same scenario shares the pain: their priority return and profit share come only from profit that exists. That asymmetry is why scheme risk, not headline cost, should drive the choice.
When should a developer choose equity over cheaper mezzanine?
When the downside scenarios are live. A scheme with unresolved ground risk, an untested contractor, a long sales period in a soft market, or a developer already carrying personal guarantees on other projects is a scheme where a fixed-cost second charge can turn a setback into a default. Equity costs more in the good case precisely because the partner absorbs part of the bad case. Where the scheme is straightforward and the gap is modest, mezzanine's fixed cost is usually the better trade as of June 2026.