Residual stock loans: when completed stock takes longer to sell

Last updated 6 November 2026 · Reviewed by 360 MMS Compliance

What is a residual stock loan?

When a project is finished, the construction loan usually has to be repaid. If some of the homes or units haven't sold, or buyers haven't settled, the developer can be left holding finished stock with a loan falling due. A residual stock loan, sometimes called a completed stock loan, replaces the construction loan with a new loan secured by the unsold stock.

It's a different loan from construction finance. There's no build left to fund and no progress payments. The focus moves from building the project to selling it.

Why would a developer need residual stock finance?

• Sales are slower than planned: the market has changed, or buyers are taking longer to commit.
• Off-the-plan buyers didn't settle: some contracts fell through at completion, so stock is back on the market.
• Avoiding a fire sale: the developer wants time to sell at a fair price instead of discounting to clear stock.
• The construction loan is due: the construction lender wants to be repaid once the project is complete.

How does a residual stock loan work?

1. Refinance at completion: the new loan repays the construction loan, secured by the completed, unsold stock.
2. Holding period: the loan is usually interest-only, or the interest is capitalised and added to the balance.
3. Sell-down: as each home or unit sells and settles, the sale proceeds generally go towards reducing the loan, and that property is released as security.
4. Exit: the loan is repaid once the remaining stock has sold, or it's refinanced, for example to a longer-term investment loan if the developer decides to keep some of the stock.

How sale proceeds are applied is set out in the loan documents, so ask your solicitor if anything is unclear.

What does the lender look at?

• The stock: what has been built, where it is, and what it's worth now. A valuation is part of the process.
• Completion: evidence that the project is finished and ready to sell and settle.
• Sales so far: what has sold, what hasn't, and why.
• The sales plan: pricing, marketing and the agent, and whether the plan is realistic for the market.
• The borrowers: individuals, companies or trusts, who must be Australian or New Zealand citizens or Australian residents.
• The exit: how the whole loan will be repaid, and what happens if sales take longer.

The lender will assess your application against its criteria, and each loan is quoted individually.

What does it cost, and what are the risks?

Residual stock loans generally cost more than a standard property loan, because they're short term and quoted deal by deal. Costs to ask about include interest, establishment, valuation and legal fees, and any costs if the loan isn't repaid when planned.

Holding stock costs money too. While the stock is unsold, you'll usually keep paying council rates, insurance, strata levies where they apply, and marketing and agent costs. With capitalised interest, the balance grows the longer sales take, which reduces the profit left at the end.

Selling new homes can also have GST and income tax consequences, including GST withholding at settlement. Talk to your accountant about how this applies to your project.

What are the pros and cons of a residual stock loan?

Possible pros:

• Repays the construction loan when it falls due, even if not everything has sold.
• Gives you time to sell at a fair price instead of discounting.
• Sale proceeds can reduce the loan as each sale settles.
• Capitalised interest can ease cash flow while you sell.

Possible cons:

• Interest and holding costs keep building while stock is unsold.
• Generally costs more than a standard property loan.
• It buys time, but it doesn't fix pricing or a weak market.
• If sales stay slow, more debt may be left to refinance.
• The National Credit Code doesn't apply, so independent legal and financial advice matters.

How do I apply for a residual stock loan, step by step?

1. Talk to your broker or our team early. Ideally before the construction loan falls due, so there's time to prepare.
2. Share the project details. What has been built, what has sold, what's left and your sales plan.
3. Get a quote. The structure is talked through and the loan is quoted individually.
4. The assessment. The lender assesses the stock, completion, the sales plan, the borrowers and the exit against its criteria, and a valuation is part of the process. Every borrower signs a business purpose declaration.
5. The offer. If the loan is approved, you receive a loan offer and documents. Get independent legal and financial advice before you sign.
6. Settlement. The new loan repays the construction loan, and sale proceeds generally reduce it as each sale settles.

How can 360 Private help?

360 MMS is a mortgage manager, and 360 Private is its specialist private lending offer for business-purpose property projects. For completed stock, we can help with:

• Your scenario: talking through the project, what has sold and what's left, with you or your broker.
• Timing: starting the conversation before the construction loan falls due, not after.
• The structure: interest-only or capitalised interest, and how the loan reduces as sales settle.
• A quote: each loan is quoted individually, based on the stock, the borrowers and the exit.
• Working with your advisers: your broker, accountant, solicitor and selling agent.
• Getting started: apply through your broker or contact our team directly.

FAQs

Sources and further reading:ATO: GST and residential property · Moneysmart: Property development · ASIC: National Credit Code

General information only. It doesn't take into account your objectives, financial situation or needs, and it isn't credit, tax or legal advice. 360 Private loans are for business purposes only, aren't regulated by the National Credit Code, and are subject to lending criteria; fees and charges apply. Kuone Pty Ltd T/As 360 MMS (ABN 81 621 683 672), Australian Credit Licence 504193.