Mezz typically locks out for 12 to 24 months, then transitions to a make-whole or minimum-multiple-on-invested-capital test. Floating-rate mezz favors minimum-multiple structures (e.g. 1.20 to 1.30x MOIC); fixed-rate mezz uses yield maintenance , sometimes plus an open prepayment window late in the term.
What is a minimum multiple?
A floor on the lender's total cash return. If the sponsor pays off early, the lender receives the greater of accrued interest plus principal, or the minimum-multiple amount. A 1.25x MOIC on a $20 million mezz means a $25 million payoff floor regardless of how early the loan is repaid.
Why does it matter?
It can dramatically increase the cost of an early refinance. A sponsor who plans to refinance at month 18 should model the MOIC payment versus held-to-maturity cost. Sometimes leaving the mezz outstanding for the full term is cheaper than the early-payoff penalty.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1