Mortgage

Is Mezzanine Financing a Second Mortgage?

While mezzanine financing seems similar to second mortgages, it operates differently and is secured by the stock of the owning corporation. Mezzanine financing is not a second mortgage in the traditional sense. Its position in the capital stack make it a distinct form of real estate financing. Due to the potential risks involved, mezzanine loans are typically placed behind a first mortgage, ensuring the protection of the property owner’s equity.

Businessman showing mezzanine vs mortgage of real estate sales and profit

What is the Difference between a Mezzanine Loan and a Mortgage?

Both mezzanine loans and mortgages serve as valuable tools for securing real estate financing, but their differences are substantial. Mezzanine loans rely on equity interests in the owning entity and operate indirectly, making them riskier for both borrowers and lenders. Mortgages, on the other hand, offer direct security backed by the property itself, providing a more straightforward and secure lending option.