What changes the funding
At practical completion, a construction facility usually falls due — but the last few dwellings can take time to sell. Residual stock finance refinances that debt against the completed, unsold stock, releasing equity and removing the pressure to discount. Because the security is finished and saleable, it's a single, relatively sharp facility.
| Security | Completed, unsold dwellings or lots |
|---|---|
| Leverage | A conservative % of completed stock value |
| Structure | Single facility; repays the construction loan |
| Repaid by | Orderly sell-down of remaining stock |
Worked example
The same project, now complete. Presale settlements clear the construction facility, leaving $7.0m of unsold, unencumbered stock. A residual-stock facility releases equity against that stock so the developer can move to the next site while selling down in an orderly way.
| Unsold stock (as-complete value) | $7.00m |
|---|---|
| Facility (65% LVR) | $4.55m |
| Equity released | $4.55m |
| Rate | 9.00% |
| Indicative term | 9 months |
|---|---|
| Finance cost (interest, ~50% avg draw) | $153,562 |
| Brokerage — BluCow (indic.) | $45,500 + GST |
| Loan to value (LVR) | 65% |
Illustrative only — residual-stock leverage and pricing depend on the stock profile, valuation and sell-down plan.
When it's the right structure
Residual stock finance suits the tail of a completed project — when construction debt is due but stock remains, and a forced discount would cost more than the facility.
Advantages and limitations
Advantages: avoids a fire-sale, releases equity, and buys time to sell at full price. Limitations: leverage is set against unsold stock only, and the facility must be repaid as stock sells.
Related services
Frequently asked questions
What is residual stock finance?
A loan secured against the completed, unsold lots or dwellings left at the end of a project. It refinances the construction facility at completion and releases equity, so you aren't forced to discount stock to repay debt on time.
How much can I borrow against residual stock?
Typically a percentage of the completed value of the unsold stock, on a conservative LVR. Because the asset is finished and saleable, pricing is usually sharper than construction debt.
Why use residual stock finance?
To avoid a fire-sale. It takes the time pressure off the tail of a project, lets you sell remaining stock in an orderly way at full price, and frees your equity to move to the next site.