Where do you live during a knock down rebuild, and does the lender care?

A construction loan is assessed on your ability to meet the full repayments at the end, but the lender also needs to know you can cover rent and the growing interest only repayments during the build. If you tell the lender you will be paying $700 a week in rent, that comes off your surplus. If you are staying with family rent free, say so, because it can be the difference between approval and decline on a tight file.

Lenders also check that the existing house will be vacant and not tenanted at demolition, because a lease in place can delay the start and the loan has a set construction period, usually twelve to twenty-four months, within which the build must be completed.

Demolition usually happens after the construction loan settles but before the first progress payment. The existing dwelling is removed, the security drops to land value, and the lender is exposed until the slab and frame go up. This is why lenders insist the property is vacant, why many want demolition paid from your own funds, and why they require builder's all-risk insurance and public liability from the day the site is handed over.

A granny flat or transportable dwelling on the block during the build is possible in some councils but lenders are cautious about anything that complicates site access or the builder's insurance. Renting is the common path. Some builders offer a rent contribution or a build time guarantee, which is worth asking about because a six month delay is six more months of rent plus interest.