What is a partial release of a mortgage?

The lender's agreement to remove its mortgage from part of the land it secures while keeping it over the rest. A developer needs one for each unit or lot sold, because the buyer must receive clear title while the lender keeps its security over what remains. The terms on which a lender will give a partial release are usually set out in the facility agreement, and each release is then registered at the land titles office or land registry.

How is a release price calculated?

Usually in two steps. The loan is first allocated across the units, commonly in proportion to their expected sale prices. The allocation is then increased by an agreed percentage so that the lender receives more than each unit's share. Where a unit is expected to sell for US$500,000 on a loan at 60% of expected sales, the allocation is US$300,000, and a 120% release would be US$360,000. The uplift is negotiated and varies from deal to deal.

Can a lender refuse to release a unit?

If the conditions in the facility are met, a lender that has agreed a release mechanism is bound by it. If the proceeds fall short, a default is continuing or the conditions are otherwise not met, it may be entitled to refuse. Without an agreed mechanism, the general rule lets a lender keep all its security until it has been repaid in full, so a developer relying on staged sales needs the terms set out in the documents.

What happens if a unit sells below the release price?

The developer has a shortfall to resolve before settlement. It can pay the difference from its own funds, or ask the lender to accept less. The lender may agree where the discount is isolated and the loan remains well covered, or refuse where it suggests prices have moved generally. The sale contract can be at risk if the answer comes late, which is why developers do well to clear discounts with the lender before signing.

// WORKED EXAMPLETHE ARITHMETIC A DECISION RESTS ON

Release Price: a Worked Example

Each sale has to pay back more than it takes away.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-09 · 6 MIN READ

// THE SHORT ANSWER

A release price answers one practical question on a development loan: when a buyer settles and the lender gives up its mortgage over that unit, how much must the lender receive in exchange? The figure is fixed unit by unit in the facility, above the unit's proportional share of the debt, so that the loan falls faster than the security does. Without it, the best units could sell first and leave the bank holding the weakest stock against a debt that had hardly moved. It also gives the lender a say when the developer wants to cut prices.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// MAKE THE CALL

Issue 08 — Basalt Ridge Developments. A new-to-bank developer, a claimed 28% ROE and two other banks circling. Your bank has a growth target. Your call first, then the senior banker's.

Read the file →

PART OF Property Development Finance

// 01 — WHY A LENDER NEEDS THE FIGURE AGREED

A development loan is secured by a mortgage over the whole site. A sale of one apartment or lot cannot complete unless the buyer takes clear title, so each settlement needs the lender's partial discharge. Left to the general law, a lender can keep every part of its security until the whole debt is paid. A release mechanism in the facility turns a concession into a defined right, and gives both sides the arithmetic in advance.

Sales do not arrive evenly. The units with the view, the corner or the better outlook go first, and they fetch the most. If each sale repaid only its pro rata share of the debt, the loan would shrink in step with the unit count while the quality of the remaining stock declined. The lender's security would be getting worse with every settlement. A release price set above that share reverses the direction.

// 02 — HOW IT IS SET

Allocated loan for a unit = loan × unit's price ÷ total expected sales

Release price = allocated loan × chosen uplift

Test at settlement : net proceeds ≥ release price

The allocation is usually made by expected price, not by unit count, so that the better units carry more of the debt. The uplift is a negotiated figure. In many bank facilities in New Zealand and Australia the lender goes further and takes all net proceeds until the loan is repaid, in which case the release price works as a minimum and the sweep sets the actual amount. Mezzanine or second-ranking lenders stand behind that, and their mortgages have to come off the unit too, so the deed between the lenders usually deals with releases.

Definitions matter. Net proceeds should mean the money the developer actually receives after permitted selling costs and any tax on the sale; GST or VAT collected for the tax authority cannot repay a loan. Lenders commonly cap the commissions and marketing costs they will allow. Deposits are also a point to settle: if a buyer's deposit has been released and spent, the proceeds arriving at settlement are smaller than the headline price, and the shortfall against the release price shows up then.

The mechanics of the release differ by market. In New Zealand and Australia a partial discharge is registered against the title created for the unit. In England and Wales, HM Land Registry takes a release of part on form DS3 with a plan of the land being discharged. The commercial test is the same.

// 03 — THE EXAMPLE

A developer is building 20 coastal holiday cabins on separate titles, constructed for this page like every figure in it. The eight front-row cabins are expected to sell for US$0.90m each, the twelve behind them for US$0.65m, a total of US$15.0m. The loan is US$9.0m, or 60% of expected sales. The release price is 120% of each cabin's allocated loan, which comes to 72% of its expected price. That uplift belongs to the example and is not a market norm.

Expected Pro rata (60%) Release (72%)

Front row, each 0.900 0.540 0.648

Back row, each 0.650 0.390 0.468

Across all 20 15.000 9.000 10.800

If the front row sells first: Pro rata Release

Repaid by 8 sales 4.320 5.184

Debt left on 12 back-row cabins 4.680 3.816

Debt ÷ value of those cabins (7.80) 60.0% 48.9%

Back-row sales needed to clear the rest: 3.816 ÷ 0.468 = 8.2, so 9

Back-row cabins free of debt when it is repaid: 12 − 9 = 3

A late offer of 0.46 for a back-row cabin

Net of 3% selling costs: 0.46 × 0.97 = 0.446

Release price = 0.468

Short by = 0.022

On a pro rata basis the bank's position after the front row has sold is no better than on the first day: 60% of value, and now secured only on the less attractive cabins. At the release price the debt has fallen to 48.9% of the remaining value, and the last three cabins are free of debt. Much of the developer's margin sits in them, and the arrangement makes the developer wait for it.

The last four lines are where the clause does its second job. A buyer offers US$0.46m and the developer wants to take it, because the cabin has been unsold for a year. The proceeds fall about US$22,000 short. Either the developer pays the difference from elsewhere or it asks the lender's consent, and the lender gets to ask whether this is one cabin or a change in the market.

// 04 — WHAT IT IS NOT

A release price is not a minimum sale price, though a facility may contain both. A minimum price clause controls what the developer may sell for; a release price controls what the lender must receive. A sale above the minimum can still fall short of the release price if costs are high. It is also separate from the presale condition, which controls when the loan may be drawn, and from a residual stock loan, which takes over if unsold units are left after the development loan's term.

DEFINED IN ONE PARAGRAPH → · THE BUILD, MONTH BY MONTH → · LOAN TO GROSS DEVELOPMENT VALUE →

// 05 — WHERE IT DECIDES A FILE

The clause is cheapest to negotiate when the loan is written and most expensive when the last units need to be sold. A developer may press for a lower uplift so that more cash comes back earlier for the next project. A lender will set that request against how many units are presold, how uneven the stock is, and how much of the developer's profit it wants left behind the loan.

Its value also depends on where the market is at settlement. In a falling market, discounts are what clear stock, and every discount tests the release price. A lender that reads each sale against the schedule can see the developer's margin shrinking before the loan is threatened, and can decide whether to allow a lower price, ask for the shortfall in cash, or move the remaining units onto a different facility. Issue 08's policy takes a harder line and sweeps all net proceeds.

DEVELOPMENT LOAN, THE PRODUCT → · PRESALES →

// SOURCES

The documents the statements on this page rest on. Each was opened and checked when cited.

HM Land Registry, Developing estates: registration services — plot sales, transfers and leases (practice guide 41, supplement 4) — section 6 — Shows that the part sold on a plot sale is discharged from the charge on the developer's title using form DS3 with a plan of the land discharged — section 02.

// QUESTIONS PEOPLE ASK

What is a partial release of a mortgage?: The lender's agreement to remove its mortgage from part of the land it secures while keeping it over the rest. A developer needs one for each unit or lot sold, because the buyer must receive clear title while the lender keeps its security over what remains. The terms on which a lender will give a partial release are usually set out in the facility agreement, and each release is then registered at the land titles office or land registry.
How is a release price calculated?: Usually in two steps. The loan is first allocated across the units, commonly in proportion to their expected sale prices. The allocation is then increased by an agreed percentage so that the lender receives more than each unit's share. Where a unit is expected to sell for US$500,000 on a loan at 60% of expected sales, the allocation is US$300,000, and a 120% release would be US$360,000. The uplift is negotiated and varies from deal to deal.
Can a lender refuse to release a unit?: If the conditions in the facility are met, a lender that has agreed a release mechanism is bound by it. If the proceeds fall short, a default is continuing or the conditions are otherwise not met, it may be entitled to refuse. Without an agreed mechanism, the general rule lets a lender keep all its security until it has been repaid in full, so a developer relying on staged sales needs the terms set out in the documents.
What happens if a unit sells below the release price?: The developer has a shortfall to resolve before settlement. It can pay the difference from its own funds, or ask the lender to accept less. The lender may agree where the discount is isolated and the loan remains well covered, or refuse where it suggests prices have moved generally. The sale contract can be at risk if the answer comes late, which is why developers do well to clear discounts with the lender before signing.

// NEXT TO IT

// ON WHOSE DESK

The seats that read this term in an ordinary week. Each page says what the seat is for, who arrives in it, and the shape of the round it runs.

Credit analystReads a borrower and writes the recommendation a decision-maker will act on.
Credit sanctionerHolds delegated authority and signs — or declines — the lending the front line brings.
Workout and recoveries managerTakes the files that have gone wrong and works out how much the bank gets back, and how.

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Make the call on one file.

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THE NUMBER · THE ECONOMY · COLLATERAL MARKETS

A bank lent 65% of the value of a factory valued at US$10m. If it has to sell, it expects a forced-sale discount of 30%, and selling costs of 5% of the sale price.

What does it recover against the US$6.5m loan?

3 MORE ON THE ECONOMY · COLLATERAL MARKETS →WHERE DO YOU READ FROM? THE PLACEMENT →

THE READING ROOMIN ONE PARAGRAPHRelease price What is a release price on a development loan?