Most developers ask “what loan-to-value can I get?” when the more useful question is “how is my project’s capital stack genuinely structured?” A £500,000 project offered 70% loan-to-value sounds straightforward, but that figure alone tells you almost nothing about whether the rest of your funding gap can actually be filled affordably.
The Capital Stack, From Bottom to Top
Every development is funded through layers, each with a genuinely different risk profile and position in the repayment order if things go wrong. Senior debt sits at the bottom, repaid first and carrying the lowest risk and lowest rate. Mezzanine or stretched senior sits above it, repaid next, priced higher to reflect that added risk. Your own equity sits at the top, the riskiest capital, and the last to be repaid, but also the most flexible.
Senior Debt: The Foundation
Our Senior Debt page covers this first-charge layer in detail. In 2026, senior development finance for experienced developers typically prices between 6.5% and 9.5% per annum, with most lenders capping loan-to-Gross-Development-Value at 60-65%. On a scheme with a £6 million GDV, a 65% cap means a maximum senior facility of £3.9 million, leaving a genuine funding gap most developers need to fill from elsewhere.
When Senior Debt Alone Isn’t Enough: Two Genuine Routes
If your own equity doesn’t stretch far enough to cover the gap between senior debt and total costs, you have two realistic options: layering a separate mezzanine facility on top, or moving to a single stretched senior facility instead. Each solves the same funding gap in a genuinely different way.
Mezzanine Finance: The Traditional Top-Up
Our Mezzanine Finance page covers this second-charge layer, typically covering an additional 10-20% of costs and stretching total leverage to 80-85% of costs or around 75% of GDV. Mezzanine currently prices at 12-18% per annum, reflecting its higher-risk position behind senior debt. It genuinely suits developments with strong, predictable profit margins, since you retain the full upside above the fixed interest cost, rather than sharing profit with an equity partner.
Stretched Senior Debt: The Simpler Alternative
Our Stretched Senior Debt page covers a single facility combining the senior and mezzanine layers into one loan, one lender, and one set of legal documents, reaching 70-75% LTGDV or 80-90% of total costs, currently priced around 8-12% per annum as a blended rate. This structure re-emerged as a significant product category in 2026 after a period of contraction during 2023-2024, and genuinely suits developers who want simplicity over running two parallel facilities with separate lenders and separate legal fees.
Choosing Between Mezzanine and Stretched Senior
The trade-off is genuine: with stretched senior, a single lender takes the full risk of your deal, meaning underwriting is considerably more demanding, with heavier scrutiny of your build programme, your contractor, and your exit strategy. For experienced developers with strong delivery evidence, this is rarely a problem. For first-time developers, a separate senior-plus-mezzanine structure, or bringing in an equity partner, often remains the more accessible route, since a stretched senior lender is taking on meaningfully more risk with less track record to rely on.
Why Some Developers Choose an Equity Partner Instead
Where your development’s profit margin is genuinely uncertain, or you’d rather share the downside risk with someone else, an equity joint venture can be a more sensible route than mezzanine debt, particularly where your equity partner brings additional value beyond capital alone, such as construction expertise or sales capability. This is worth weighing against mezzanine specifically where your margins are less predictable than you’d want for taking on fixed-cost debt.
Once the Building Is Finished
Whichever structure funded your build, once your scheme reaches practical completion, continuing to pay development-level rates for construction risk that’s already gone makes little financial sense. Our Development Exit Finance page covers switching onto genuinely cheaper terms the moment construction risk has fallen away, while you sell or let the finished units at full value rather than rushing sales to meet an expensive facility’s deadline.
If This Is Your First Development
Capital stack complexity is exactly why a straightforward first project matters more than an ambitious one. Our First Time Developers page covers what genuinely makes a first scheme fundable, including why appointing an experienced contractor matters more to lenders than almost anything else about your own background.
Why the Numbers Alone Don’t Tell the Full Story
A lender offering 70% loan-to-value on paper can mean genuinely different things depending on whether that’s calculated against cost or against completed value, and whether it’s a single blended facility or requires you to separately arrange a second layer of finance on top. It’s worth having your broker walk through the actual cash you’ll need to find at each stage, not just the headline percentage, before you commit to any specific lender’s terms.
Regional and Market Context Worth Knowing
Pricing across the development finance market has remained broadly stable through 2026 following the volatility of 2022-2024, with London and the South East typically attracting the most competitive terms given the deepest pool of lender interest and lower perceived sales risk. It’s worth understanding how your specific scheme’s location genuinely affects your realistic pricing before finalising your budget.
Why the Right Structure Depends Entirely on Your Specific Deal
There’s no universal answer here – the right blend of senior debt, mezzanine, stretched senior, and equity depends on your project’s specific margins, your genuine experience, and how much risk you’re comfortable carrying versus sharing. Deal structuring is genuinely where the most value is created, or lost, in property development, and it’s worth getting this right from the outset rather than defaulting to whichever structure feels most familiar.
Getting Your Capital Stack Right From the Start
Given how much genuinely depends on your specific scheme’s numbers, your track record, and your realistic risk appetite, it’s worth having a proper conversation about your full capital stack before committing to any single layer of finance. Get in touch with details of your development, and we’ll help you understand which combination of senior debt, mezzanine, stretched senior, and equity genuinely suits your project.
Frequently Asked Questions
What’s the difference between mezzanine finance and stretched senior debt?
Mezzanine is a separate second-charge facility layered on top of senior debt from a different lender; stretched senior combines both layers into a single facility from one lender with one set of legal documents.
How much can senior debt alone typically fund?
Most lenders cap senior debt at 60-65% of Gross Development Value, though some specialist lenders stretch to 70% for particularly strong, experienced borrowers.
Why would I choose mezzanine over stretched senior, or vice versa?
Mezzanine suits developments with strong, predictable margins where you want to retain full upside; stretched senior offers simplicity through a single facility but involves more demanding underwriting given one lender takes the full risk.
Is stretched senior debt genuinely accessible to first-time developers?
Often less so than to experienced developers, since the heavier underwriting scrutiny typically favours those with a proven delivery track record.
What happens to my development finance once the building is complete?
Most developers refinance onto development exit finance at that point, switching onto considerably cheaper terms once construction risk has genuinely fallen away.
Get in touch with details of your project, and we’ll help you structure the capital stack that genuinely fits.
