In every state and territory except Tasmania, builders must have government-controlled Domestic Building Insurance (DBI) to cover for defective work or non-completion in the event of the builder's insolvency, disappearance or death. Your bank will stop making payments if the builder is insolvent, but you'll still need to meet interest payments on the amount you've already drawn down. You would need to find a new builder to complete the work for a fixed price, submit the new contract to the lender for approval, and make a claim against DBI if you are left out of pocket (i.e. if the price to complete the work exceeds the amount remaining in the original builder's contract).