Can You Use Mezzanine Finance to Buy a Commercial Property?

Why banks won't fund this

Banks require 25–35% equity for commercial property purchases. This locks out buyers who don't have sufficient capital. Banks could structure a second mortgage but prefer not to—it complicates their risk assessment and creates administrative burden.

How specialist lenders look at this differently

Specialist lenders assess deals using a different framework:

Lower equity requirement enables more deals. 15–20% equity instead of 25–35% unlocks properties for investors with less capital.
Mezzanine assessment is commercial and efficient. Lenders look at property value, lease income, and your equity—not bureaucratic checklist.
Faster than restructuring bank finance. Mezzanine can settle in 10–14 days alongside your bank facility.

Ready to explore your options?

Tell us about your situation and we'll show you what lenders can offer.

Describe Your Situation

What a typical deal looks like

Illustrative example — not a real case

An investor wants to buy a $2M office building generating $140K annual lease revenue. A bank will lend $1.4M (70% LVR) at 4.8% p.a. The investor has $400K in capital but needs $600K more.

A mezzanine lender approves a $600K second mortgage at 9.2% p.a. for 24 months. The investor now has $1.4M (bank) + $600K (mezzanine) = $2M to purchase. The annual lease income of $140K comfortably covers bank payment (~$67K), mezzanine payment (~$60K), and provides surplus. In 24 months or on refinance, the mezzanine is repaid.

Typical deal structure

Typical mezzanine sizes

$100K–$5M

Interest rates

From 7% p.a. onwards

Loan term

1–24 months

Reduces equity requirement to

15–20% (vs. traditional 25–35%)

Security

Second mortgage on commercial property

Property types

Office, retail, industrial, medical, warehouse

Settlement speed

10–14 days from application

Early exit

Possible on property sale or refinance

Ranges shown are across our full panel of specialist lenders. Your deal may fall within a narrower range depending on your specific circumstances.

What lenders want to see

For this scenario, lenders focus on:

Commercial property valuation — from independent valuer.
Lease agreements — tenant details, rental income, lease term.
Bank facility details — first mortgage amount, rate, term.
Your equity position — cash you're bringing to the purchase.
Proof of funds — bank statement or financial evidence you have the equity.
Commercial expertise — your track record buying/managing commercial property.

When this might not work

Specialist lending has limits:

Lease income is insufficient — if rent doesn't cover debt service on both loans, deals may decline.
Tenant is weak or lease is short-term — lenders want stable, long-term tenancies.
Commercial market is softening — declining property values reduce available equity.
Your commercial experience is minimal — first-time commercial buyers may face higher rates or lower LVR.
Property is distressed or hard to lease — secondary-market or struggling properties may be declined.

What our panel can offer

Our panel includes specialist lenders who actively fund this scenario.

$100K–$5M
From 7% p.a. onwards
1–24 months
15–20% (vs. traditional 25–35%)
Second mortgage on commercial property
Office, retail, industrial, medical, warehouse
10–14 days from application
Possible on property sale or refinance

Describe your situation and we'll match you with the best options.

How to get funding — Step by step

The process is straightforward:

Step 1: Describe your deal. Tell us the property type, location, value, and what you need the funds for.
Step 2: Get matched. Our AI matches your situation against specialist lenders on our panel.
Step 3: Move forward. Contact your matched lenders directly. Settlement can happen within days.

Common questions

Can I buy commercial property with less equity using mezzanine?

Yes. A bank might lend 70% of value on a $1M property ($700K). You'd normally need $300K equity. With mezzanine, you might provide $150K and borrow $150K in mezzanine, needing only 15% equity.

What types of commercial property can I buy with mezzanine?

Office buildings, retail centres, industrial, warehouses, medical clinics, or any income-producing commercial property. As long as the property will generate lease income, mezzanine lenders will fund it.

What interest rates apply to commercial property mezzanine?

Rates typically range from 7% p.a. for prime office/retail in strong locations to 12–15% for industrial or secondary market locations.

What if I sell the property before the mezzanine matures?

You can repay the mezzanine early when you sell, usually with no prepayment penalty. Mezzanine lenders expect projects to be shorter-term than traditional mortgages.

Can I refinance the mezzanine later?

Yes. Once the property has a strong lease and demonstrated income, you may be able to refinance the mezzanine with a traditional lender or convert it to a first mortgage extension.