A project reaches practical completion, the construction facility is due for repayment and a handful of units have not settled. This is one of the most common pressure points in Australian residential development and it has a finance product built specifically for it: residual stock finance. This article covers why the product exists, how lenders size it, which lender categories provide it and what lenders expect on the way out. All figures are indicative category ranges as at June 2026, not offers or quotes.
What Residual Stock Finance Is
Residual stock finance is a loan secured against completed but unsold (or unsettled) dwellings in a finished project. It repays or replaces the construction facility and gives the developer time to sell the remaining stock at market pace rather than under a deadline.
The security is fundamentally different from a construction loan. The lender is no longer funding a building that does not exist yet; it is lending against titled, completed dwellings that can be valued, inspected and sold. That lower risk profile is why residual stock facilities generally price below development facilities from the same lender category.
Why the Product Exists
Residual stock positions arise in three main ways.
Settlements fall over. A pre-sales register that looked solid at financial close can erode by completion. Purchaser finance falls through, valuations at settlement come in below contract price, foreign purchasers fail FIRB or funds-transfer hurdles and sunset issues trigger rescissions. A project that was 90% pre-sold can complete with a meaningful tail of stock back on the books.
The market shifts during the build. An apartment project can take 2 to 3 years from launch to completion. If demand softens over that window, the unsold balance at completion is larger than the feasibility assumed and the units take longer to move.
The developer chooses to hold. Not every residual position is distressed. Some developers deliberately retain stock rather than discount into a soft market or hold completed dwellings to release equity for the next site while selling at full price over time. Residual stock finance funds that strategy.
In every case the trigger is the same: the construction facility is expiring and the sales proceeds that were meant to repay it have not all arrived.
How Lenders Size a Residual Stock Facility
Sizing turns on two questions: what is the stock worth and on what basis is it valued.
In-One-Line vs Individual Security
A valuer can assess unsold stock 2 ways. An individual (or "as separate titles") valuation sums the market value of each dwelling sold one at a time to ordinary purchasers. An in-one-line valuation asks what a single buyer would pay for the entire parcel in one transaction and it is typically 10% to 20% below the aggregate of the individual values (indicative as at June 2026) because a bulk buyer prices in their own selling costs, holding time and profit.
Which basis the lender uses changes the loan materially. A conservative lender funding a large tail of units will often size against the in-one-line figure, on the logic that a forced sale would be a bulk sale. A smaller tail of 3 to 6 dwellings is more likely to be assessed on individual values, because selling them one at a time is realistic.
LVR on As-Is Value
Residual stock facilities are sized on a loan-to-value ratio against the as-is completed value, not against cost or gross realisation. Indicative category ranges as at June 2026:
| Lender category | Typical LVR basis | Indicative LVR range |
|---|---|---|
| Major bank | Individual or in-one-line, conservative | 50% to 60%, limited appetite |
| Non-bank specialist | Individual values on small tails, in-one-line on larger | 60% to 70% |
| Private credit fund | Deal-by-deal, often in-one-line | 60% to 70%, sometimes higher with structure |
| Private / caveat lender | As-is, speed-led | 50% to 65%, shorter term |
These are illustrative of how each category behaves, not quotes. Interest is commonly capitalised into the facility rather than serviced monthly, so the lender also tests that the LVR holds after capitalisation across the expected sell-down period.
Which Lender Categories Play
Major banks have limited appetite for standalone residual stock lending. Where they participate it is usually for existing development clients, at conservative LVRs, with demonstrated sales momentum.
Non-bank specialist lenders treat residual stock as a core product. Many run dedicated residual stock lines with 12 to 24 month terms, capitalised interest and sell-down covenants and can settle in 2 to 6 weeks (indicative as at June 2026).
Private credit funds play at the larger end, including portfolio-level residual facilities across multiple completed projects and tend to price on the overall risk and exit story rather than a rate card.
Private and caveat lenders are the speed option. Where a construction facility expires in a fortnight and a refinance is not yet approved, a short private facility against the completed stock can bridge the gap. The cost is materially higher and the term short, so the structure only works with a defined exit.
Mezzanine and preferred equity providers are rarely the answer on completed stock. The gap a mezzanine layer fills during construction has usually closed by completion; where leverage beyond senior levels is sought on residual stock, it is typically priced and structured case by case.
Exit Expectations
Residual stock facilities are designed to be self-liquidating. The lender expects the loan to repay from unit settlements and the facility terms are built around that.
- Sell-down covenants. Many facilities require a minimum number of sales or a minimum debt reduction per quarter, tested against a sales schedule agreed at settlement.
- Release pricing. Each title is released on payment of an agreed release amount and lenders commonly require consent before stock is sold materially below the valuation that sized the loan.
- Minimum terms and exit fees. Because the lender's return depends on the loan running, many facilities carry a minimum interest period or an exit fee. A developer expecting a fast sell-down is better served comparing total facility cost over the realistic period, not the headline rate.
- Refinance to hold. Where the strategy is to retain stock as rental product, the expected exit is a refinance to term investment debt once the dwellings are tenanted. Lenders want that pathway evidenced, not asserted.
A Composite Scenario
An illustrative composite, not a real transaction. A developer completes 24 townhouses in outer Melbourne with a $13M construction facility. Eighteen settle on time and repay most of the debt, leaving roughly $3M outstanding against 6 completed townhouses with individual values totalling $4.8M.
A non-bank specialist refinances the tail with a residual stock facility at 65% of value, clearing the construction lender in full and returning a margin of equity for the next site. The facility runs 18 months with capitalised interest and a 2-sales-per-quarter covenant; the stock sells through in 11. The construction lender is repaid on time, the developer avoids discounting 6 units into a single quarter and the next project starts sooner.
Frequently Asked Questions
What LVR do residual stock lenders go to?
Indicatively 60% to 70% of as-is value for non-bank specialists and private credit funds as at June 2026, with major banks lower and private lenders varying with speed and term. The valuation basis (individual vs in-one-line) often matters more than the headline LVR.
Is residual stock finance cheaper than development finance?
Within the same lender category, generally yes. The security is completed, titled and saleable, which is a lower risk than a partly built project. Pricing still varies widely with LVR, location, stock type and sell-down profile.
Can equity be released for the next project?
Often. Where the residual stock value comfortably exceeds the construction debt, a facility sized at standard LVRs can repay the construction lender and return surplus funds. Lenders assess cash-out requests more conservatively than straight refinances.
How long do residual stock facilities run?
Commonly 12 to 24 months (indicative as at June 2026), matched to a realistic sell-down schedule. Private and caveat facilities run shorter, typically 3 to 12 months.
Mapping the Lender Field for a Residual Position
Residual stock is one of the clearer examples of the structural shift in Australian development finance: the product barely exists at the major banks and is core business for the non-bank and private credit market. The free LenderBridge matching tool at lenderbridge.com.au/lender-match maps a project's shape against the published criteria of the development-finance lenders in the marketplace. See which lender types could fund a project like this.
General information only, not credit assistance or financial product advice. LenderBridge connects borrowers and lenders; it does not advise or recommend. Verify figures with a lender.