What is a Deposit Bond James?
Nicole Cannon | March 23, 2018
So you have found a property you want to purchase, but you face a dilemma:
Your savings are locked in a term deposit or are tied up in the equity of your property.
How do I purchase a property when I cannot access my cash?
A simple solution to this may be to have a Deposit Bond.
Deposit Bonds are an insurance policy that indemnifies (or guarantees) that you, the buyer, will have the deposit available at settlement.
There is two type of deposit bonds:
* A Short-Term Bond or
* A Long-Term Bond
Different criteria apply for short-term and long-term deposit bonds.
A Short-Term Deposit Bond, also known as a Finance Backed Deposit Bond can last for 6 months.
If you have formal finance approval and your loan plus your available savings is equal to or greater than 105% of the purchase price, a Short Term Deposit Bond can be issued without having to assess your borrowing capacity.
A Long-Term Deposit Bond will require a full assessment of your position to determine your borrowing capacity. This is commonly used when buying off the plan and you are needing a deposit bond to exchange.
How much does a deposit bond cost?
The costs for a bond vary. The longer the bond term is, the higher the premium will be.
Contact Us if you would like a quote for a deposit bond – it will only take 2 minutes.
All we need is the purchase price and when will the settlement be.
Deposit Bond PROS
* Quick turnaround time
* Saves you from having to withdraw investments prematurely
* You can have a blank bond (i.e not property specific) as a way to exchange at auction
* Valid for six months for short-term and four years for Off The Plan
Things to be aware of with deposit plans:
* Not all vendors will accept a deposit bond
* You must have written consent in the contract that you can exchange by deposit bond
* Typically the deposit bond will be 10% of the purchase price
* If your bond is less than 10% of the purchase price, you may need to use savings to complete the exchange.
* Some lenders will only allow deposit bonds from certain providers.
It’s Bond….Deposit Bond
