Refinance to a residual stock facility when three things line up: the project has reached practical completion with titles issued, you're holding unsold units, and the construction facility is at or near its sellout date. That combination — finished stock, expiring development debt — is exactly what a residual stock loan exists to solve: it repays the construction lender and lets the remaining units sell at market pace instead of at clearance pricing.
The squeeze it solves
A construction facility is priced for construction risk and written to a program: build, sell, repay by a date. Past that date the lender's patience gets expensive — extension fees, penalty margins, and pressure to cut prices. Discounting the last four units by 10% to clear $5.4M of stock costs $540k. A residual stock facility that carries them for six months while they sell at list costs a fraction of that. The maths is rarely close.
What the facility looks like
Security is the completed, unsold stock. The valuer issues an in-one-line valuation — what the parcel of units is worth sold together to a single buyer — which typically sits 10–15% below the sum of the individual prices. Lenders advance 60–70% of that in-one-line figure, private credit sometimes toward 75%. Call it 55–65% of retail value once the discount washes through.
Interest is either serviced — straightforward if some units are leased while they sell — or capitalised into the facility. Each sale repays the lender an agreed release amount per unit, with the surplus above the release price flowing back to you. Terms usually run 6–24 months: this is a bridge to sellout, not a hold strategy.
Releasing equity for the next site
The second use, and often the real motive: if the residual facility repays the construction debt with headroom under the LVR cap, the difference comes out as cash. Developers running back-to-back projects use residual stock facilities to unlock the deposit on the next site without waiting for the last settlement of the current one. That's the difference between one project a year and two.
When not to do it
If the remaining stock will genuinely sell within 60–90 days, establishment costs, valuation and legals can outweigh the carry saving — a short extension with the construction lender may be cheaper. And thin stock in a soft market at maximum LVR just moves the problem: if the in-one-line valuation comes in low, the facility won't clear the construction debt and you're negotiating from behind.
Start six to eight weeks out
The refinance can't settle until occupancy certificates issue, the plan registers and titles exist — but everything else can be done in parallel: lender selected, valuation instructed, credit approved, docs drafted. Start at lock-up rather than after completion and the facility settles the week titles land, before the construction lender's meter starts running hot. Leave it until the extension notice arrives and you're paying penalty pricing while the valuer finds a car park.