Residual Stock Loans

Residual stock loans for early equity release from a completed project

Home - Services - Residual Stock Loans

Residual Stock Loans Australia: Unlock Capital From Completed Developments

A residual stock loan lets you refinance completed but unsold apartments, townhouses or land lots when your construction loan falls due, so you don’t have to discount stock to meet a bank deadline. Formation Finance arranges residual stock loans from $200k to $20M+ for developers and builders, with up to 70% LVR, terms of 3–24 months and rates from 8.49% p.a.

We are a Melbourne-based finance team with access to 50+ lenders, including private lenders, family offices and specialist non-bank lenders. Residual stock loans sit at the end of our property development loans lifecycle, after the land loan and construction loan stages. All residual stock loans we arrange are for business or investment purposes.

Residual Stock Loans Quick Snapshot

Key Features	Indicative Range
Loan amount	$200k – $20M+ (case-by-case)
Term	3 – 24 months
Up to LVR	Up to 70% (of the "as-is" value of the unsold stock; up to 75% with a second-ranking loan)
Interest rate from	From 8.49% p.a. (subject to LVR, location, stock type & exit strategy)
Repayment	Capitalised or prepaid interest (no monthly repayments in most cases)
Security	First mortgage over the unsold lots (director guarantee usually required)
Stock types	Apartments, townhouses, house-and-land, titled land lots, commercial & industrial units
Project status	Completed, or near completion (occupancy certificate imminent)
Income verification	Not required (asset-backed lending)
Typical timeframe	Indicative terms within 48 hours • Settlement typically 5–10 business days (after valuation & required documents are received)

All figures are indicative only and not an offer of finance. Availability, terms and timing are subject to valuation, security, lender approval and receipt of required documentation. Establishment, valuation and legal fees apply. For business and investment purposes only.

What Is a Residual Stock Loan?

A residual stock loan is a short-term, business-purpose loan secured by completed but unsold dwellings or lots in a development. Developers use it when the construction loan falls due before all of the stock has sold. The new lender repays the construction lender in full and takes a first mortgage over the unsold stock.

Because the building is finished and construction risk is gone, residual stock loans are usually priced below construction finance. Most are interest-only, with interest capitalised (added to the loan) so there are no monthly repayments while the stock is being sold.

As each unit settles, an agreed release price is paid to the lender and the loan reduces. The facility is repaid in full when the last units sell, or when the remaining stock is refinanced to a longer-term investment loan.

How the LVR is calculated

Residual stock lenders apply the LVR to the “as-is” value of the unsold stock, as assessed by a panel valuer. Many lenders use the GST-exclusive value for new residential stock, and the capitalised interest provision sits inside the facility limit.

Facility limit = value of unsold stock (often GST-exclusive) × LVR

Example: 4 unsold townhouses are valued at $900,000 each, or $3,600,000 including GST (about $3,273,000 excluding GST). At 70% LVR, the facility limit is about $2,291,000. After a 12-month interest provision of about $206,000, a 1.5% establishment fee and valuation and legal costs, the day-one advance is about $2,030,000. That repays a $1,900,000 construction loan and releases about $130,000 of equity.

How It Works

Tell us about the project, the unsold stock and your current construction loan: a 10-minute call or online enquiry.
We compare lenders and send you indicative terms, typically within 48 hours.
A panel valuer values the unsold stock, and the lender issues formal approval.
Loan documents and settlement: your construction lender is repaid in full.
Sell the stock on your timeline. The loan reduces with each settlement and is repaid when the last unit sells.

When a Residual Stock Loan May Be Suitable

Your construction loan is about to expire

Construction facilities are written for the build period, not the sell-down. If your loan expires before enough units have settled, the construction lender may charge default interest or push for a quick sale. A residual stock loan repays that lender in full and gives you 3–24 months to sell the remaining stock, with interest capitalised so there are no monthly repayments while the sales campaign runs.

Avoiding a discounted sell-down

Selling the last units at a discount to clear debt can wipe out a large part of the project margin. A residual stock loan lets you hold the stock and market it at full price, while the release price on each sale steadily reduces the loan. This is often the cheaper option once you compare the interest cost with the discount buyers expect from a developer under pressure.

Releasing equity for your next site

Once some units have settled, the equity in the remaining stock is often enough to fund the deposit on your next site. A residual stock loan can repay the construction debt and release part of that equity as working capital, so your next project can start without waiting for the last sale. See our land loans for site acquisition funding.

Holding stock through a slow market

When buyer demand softens or settlements are delayed, some lenders allow unsold units to be leased while they remain on the market. Rental income helps cover holding costs, and you avoid selling into a weak market. If your exit becomes refinancing rather than selling, the stock can later move to a longer-term investment loan.

Recent Residual Stock Deals We've Arranged

How developers have used residual stock loans. Names and some details changed for privacy.

Case study 1

$3.5M, Brisbane QLD

Loan: $3,500,000
LVR: 70%
Term: 18 months
Stock: 5 of 14 townhouses unsold

Situation: The construction facility was approaching expiry with 5 of 14 townhouses unsold. The developer wanted to release equity from the 9 settled units to fund the next site acquisition, without discounting the remaining stock.

Solution: A 70% LVR residual stock loan against the 5 unsold townhouses for an 18-month term, allowing the developer to keep marketing the stock at full price.

Exit: $1.6M of equity was released into the next site acquisition. All 5 residual units sold within 9 months at full asking price.

Illustrative example

$3.8M, Brisbane QLD

Loan: $3,800,000
LVR: 65%
Term: 18 months
Rate: from 8.49% p.a.
Approved: within 48 hours
Settled: 7 business days

Situation: A developer completed 8 townhouses, but 5 remained unsold when the construction loan expired, and the lender was charging default interest.

Solution: A residual stock loan repaid the construction lender and released some equity, giving the developer time to sell at full price instead of discounting.

Exit: The remaining townhouses sold over 14 months, with the loan reduced after each sale.

Examples are illustrative only and not a quote or offer. Rates, LVRs and terms depend on lender assessment, security and exit strategy. Fees apply.

Residual Stock Loans vs Other Options

Key Features	Residual Stock Loan	Construction Loan Extension	Bridging Loan	Selling at a Discount
What it does	Refinances completed, unsold stock	More time from your existing lender	Short-term loan against any property	Clears the debt through quick sales
Up to LVR	Up to 70%	At the lender's discretion	Up to 70–75%	–
Term	3 – 24 months	Usually short	3 – 24 months	–
Cost	From 8.49% p.a.	Construction rate (often plus default interest)	From 7.95% p.a.	No interest (but lost margin on each unit)
Who it suits	Developers who want full price and time to sell	Short delays with a cooperative lender	Buying before selling, short-term cash flow	Falling markets or very high holding costs

Need to borrow above 70%? A second mortgage loan behind the residual stock facility can take total leverage up to 75%.

Rates and LVRs are indicative and subject to lender assessment, security type, location and exit strategy. Fees apply.

Reviewed by Jackie Wang, Partner at Formation Finance

Jackie Wang has over 10 years of experience in finance and lending, structuring residual stock loans, construction finance and development funding for Australian developers and builders. Jackie holds a Master of Professional Accounting from RMIT University and assesses every residual stock loan on the numbers that matter most to lenders: the “as-is” value of the unsold stock, the release prices and a realistic sell-down timeline.

Jackie has reviewed this page to ensure the rates, LVRs, loan terms, settlement times and lending criteria reflect current market conditions.

Last reviewed: 22/10/2026

Residual Stock Loans FAQ

How fast can I get a residual stock loan approved?

In most cases, we can provide indicative terms within 48 hours of receiving the project details. Formal approval follows once the panel valuation is received, and settlement typically occurs 5–10 business days after that.

How much can I borrow against unsold stock?

Typically up to 70% of the “as-is” value of the unsold stock, or up to 75% with a second-ranking loan. Many lenders apply the LVR to the GST-exclusive value, and the capitalised interest provision sits inside the facility limit, so the day-one advance is lower than the headline figure.

Do I need to make monthly repayments?

Usually not. Most residual stock loans capitalise or prepay the interest, so there are no monthly repayments while the stock is being sold. The loan is repaid from sales proceeds through release prices.

What are the fees on a residual stock loan?

Expect an establishment fee, a valuation fee and lender legal fees, and with some lenders a line fee. Most fees are deducted at settlement. We disclose all fees in writing before you accept an offer.

Can I get a residual stock loan before the occupancy certificate is issued?

Some lenders will issue terms for projects close to completion, but settlement normally requires the occupancy certificate and, in most cases, registered titles. Applying as you approach completion means the facility is ready when your construction loan falls due.

What if the stock doesn't sell before the loan term ends?

Options include extending the facility, refinancing the remaining stock to a longer-term investment loan, or adjusting prices. We agree the fallback exit before settlement so the term matches a realistic sales timeline.

Is a residual stock loan the same as a bridging loan?

They are similar short-term property loans. A residual stock loan is secured by completed, unsold stock in a development and is repaid through release prices as units sell. A bridging loan is secured by an existing property and is usually repaid by a single sale or refinance.