Senior Debt

Senior Debt is the primary, first-ranking loan in a financing structure. It is secured by a first mortgage and has the highest repayment priority — meaning the senior lender is repaid before any mezzanine lenders, equity partners, or subordinated creditors. In Australian property development, senior debt typically funds 55–65% of GRV.

Why It Matters

Understanding senior debt is essential for structuring any development or property deal. Because the senior lender takes first priority, they carry the lowest risk in the capital stack — and therefore charge the lowest interest rate. Every other layer of funding (mezzanine, equity gap, developer equity) sits behind it and is priced accordingly.

How It Works

The senior lender provides the majority of project funding, secured by a first mortgage.
Senior debt is typically drawn down in stages as the project progresses.
A Quantity Surveyor (QS) verifies progress before each drawdown.
The senior lender is repaid first from sell-down proceeds or refinance.

Common Use Cases

Primary funding layer in townhouse development finance
First mortgage construction loans for residential and commercial projects
The base lending layer that determines how much mezzanine or equity is needed
Bank and non-bank construction funding facilities

Related Switchboard Resources

What LVR does senior debt typically cover?

In development finance, senior debt usually covers 55–65% of the project's Gross Realisation Value (GRV), or 65–80% of total project cost (LTC).

Is senior debt always from a bank?

No — non-bank and specialist lenders also provide senior construction funding. However, bank senior debt typically carries lower rates. A broker can help match you with the right senior funder for your project.

What happens if the project does not sell?

The senior lender has first claim on the asset. If sell-down stalls, the borrower may need to retain and refinance into a longer-term facility to repay the construction loan.