Who this page is for
- Owners whose builder collapsed part-way through a build funded by a construction loan
- Buyers who paid deposits or progress payments and now face an unfinished home
- Borrowers who need to know if a replacement builder can be funded under the existing loan
- Anyone comparing ways to complete an unfinished house
Builder went into liquidation: finish build loan first steps
If your builder went into liquidation, finish build loan planning starts with a short checklist. None of it needs a final decision on day one, but the order matters.
- Stop making further payments to the builder until you have advice
- Tell your lender and ask how progress payments and the loan terms are affected
- Check whether HBCF cover exists for your property on the HBCF Certificates Register and contact icare
- Document the state of the work with dated photos and an independent inspection or report where possible
- Get legal advice, and talk to the appointed insolvency practitioner about contracts and materials on site
The icare guide for homeowners lists early warning signs such as unexplained delays and requests for payments outside the contract, and says to pause and get advice when they appear.
What icare HBCF says about claims after insolvency
Home Building Compensation Fund (HBCF) cover is issued by licensed builders for residential building work over $20,000, unless an exemption applies. icare describes it as a last resort cover, and its claim eligibility page sets out what has to happen first.
- A claim can be made once a trigger event has happened: the builder has died, become insolvent (for example bankrupt or in liquidation), disappeared, or had their licence suspended for not complying with a money order
- Finding defects or unfinished work on its own is not a trigger event
- For work that did not start or was not completed, icare states that you must notify them within 12 months
- For incomplete work, cover may include loss of your deposit and the cost to complete the work, up to the policy limit
- icare lists the maximum on each policy as $340,000 for policies issued on or after 1 February 2012 (and $300,000 for earlier policies), which includes any claims by previous owners
These points come from icare's website as checked on 1 October 2026 and can change. The what am I covered for page explains the limits and exclusions. Whether HBCF applies to your situation, and how much it may pay, is for icare to decide, so contact them directly rather than assuming a result.
What your construction lender will want to see
Lender processes vary, but a lender asked to continue funding a stalled build commonly wants to understand the position before releasing more money. Expect questions like these:
- What has been paid to date compared with the work actually completed
- A written quote, and usually a new contract, from a licensed replacement builder
- A revised cost to complete, including any rectification the new builder identifies
- Whether a fresh valuation is needed for the reduced or changed scope
- Evidence of HBCF cover for the new contract where the law requires it, and of any HBCF claim you have lodged
Some lenders will continue the existing loan with a replacement builder, and others may want a different approach. Your broker asks the questions up front so you are not surprised. For how the stage payments normally work, see progress payments in NSW.
Builder insolvency construction finance: closing the funding gap
After a collapse, the usual problem is arithmetic. The cost to complete can exceed what remains undrawn on the loan, particularly if earlier stages were paid ahead of the work. That gap is the core issue in builder insolvency construction finance.
Options depend on the facts. They can include using your own funds, seeking an HBCF payment if you are eligible (timing and outcome are up to icare), adjusting the scope with a replacement builder, or asking your broker to look at a revised structure. If a replacement quote comes in above the approved loan, our guide to construction cost overrun funding covers the shortfall options.
If your existing lender will not continue and you need to complete an unfinished house loan elsewhere, non-bank construction loans and what to do when a construction loan is declined explain the alternatives. Model the revised numbers in our home loan calculators before you sign a new contract.
Getting a stalled build finished in four steps
Stabilise
Notify your lender, pause payments, record the state of the work and check HBCF cover.
Price the completion
Independent inspection and a written quote from a licensed replacement builder.
Restructure the funding
We review the loan, the undrawn balance and the gap, then compare lender options.
Restart and draw
New contract in place, lender approvals confirmed and stage payments resumed.
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Builder insolvency and construction loan questions
What happens to my construction loan if my builder went into liquidation?
Builder went into liquidation, finish build loan with a new builder: is that possible?
Does the icare Home Building Compensation Fund pay to finish the build?
How long do I have to notify icare if my builder became insolvent?
Is there a complete unfinished house loan for a half-built home?
Who should I call first after a builder insolvency?
Information checked on 1 October 2026. Policies and lender participation may change.
Confirm current policy, eligibility and pricing directly with your chosen provider before applying. Confirm HBCF eligibility, limits and time limits directly with icare, and seek legal advice about your building contract. Lender policy varies, and your broker will match you to a suitable lender for your situation.
This information is general in nature. Policies vary by lender and change frequently. Confirm current requirements with your chosen provider and seek professional advice.
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