This article is for general information purposes only and reflects the state of information at the time of publication. It is not legal or financial advice. Always seek professional advice tailored to your specific circumstances before making decisions.
So, you’re thinking about getting a deposit bond?
Whether you’re a first home buyer, seasoned property investor, downsizing, or buying off the plan, chances are you have a few questions.
Don’t worry – we’ve got the answers you need.
Here are the 10 most common deposit bond questions answered:
#1. When do I pay back the deposit?
You actually never “pay back the deposit” unless there is a claim. The role of a deposit bond is to “guarantee” you for the deposit amount right up until you get the funds at settlement. In other words, a deposit bond tells the vendor that you’re good for the money.
At settlement, you pay the full purchase price plus the deposit and any additional costs, like stamp duty. The only money that is exchanged up-front is the deposit bond fee, which you pay to the provider.
#2. How much does a deposit bond cost?
It depends on the deposit bond amount and the required length of time. Talk to our team for a quote.
#3. Do I pay interest?
No – you only pay the one-off fee just before your deposit bond is released. That’s the brilliant thing about a deposit bond. To get an instant quote for your deposit bond please click here.
#4. I am buying off the plan – how long does the deposit bond need to be made out for?
In most cases, buying off the plan means the deposit bond needs to be issued up to the “sunset clause” date. The sunset clause date is a provision in off-the-plan contracts that allows either the vendor or the purchaser to rescind the contract if the title to the property has not been created by a specific date.
Check your contract of sale for the sunset clause date or ask our team for help. Some vendors may request additional time on a deposit bond. If settlement occurs earlier than 6 months from the expiry date of the deposit bond, a pro-rata refund can be obtained (maximum refund applicable is 18 months). Terms and Conditions apply – refer to your deposit bond application or bond provider’s website, or ask our team for assistance.
#5. Do I need to seek approval from the vendor to use a deposit bond?
Definitely. Always check with the real estate agent or directly with the vendor to make sure they will accept a deposit bond instead of a cash deposit.
#6. What are the differences between a deposit bond and a bank guarantee?
The idea is similar: a bank guarantee is a guarantee from a lending institution ensuring the liabilities of a debtor will be met. If the debtor fails to settle a debt, the bank covers it.
Key differences include:
- Bank guarantees are secured – they require real estate or cash security to release.
- Deposit bonds are unsecured – eligibility assessment ensures you have the financial capacity to settle, with the underwriter providing security and assurance for the deposit in case of a claim.
- Bank guarantees usually have higher set-up and ongoing costs compared to the one-off deposit bond fee.
- Bank guarantees require more paperwork than a deposit bond application.
- Deposit bonds are generally faster to obtain.
#7. How quickly can a deposit bond be issued?
Much faster than you think. Within 15 minutes, we can help you get pre-approval. Within one business hour, we can have your application ready for e-signing. Once you return your signed application with the bond fee payment, your deposit bond can be ready in less than one business hour!
#8. Am I eligible for a deposit bond?
Eligibility depends on your situation, but you typically qualify if:
- You hold formal finance approval, OR
- You have conditional finance approval that is subject to valuation only, OR
- You are selling a property and funds from the sale are enough to purchase your new property outright.
If none of these apply, or your property settles over six months, your deposit bond provider will conduct an asset, income, and liability assessment. You or your guarantor may need to own a property with some equity. The best way to check eligibility is to talk to our team.
#9. I am a first home buyer; can I get a deposit bond?
If you already have formal approval for finance through a family guarantor loan, and your property settles within six months, you can typically obtain a deposit bond. Your guarantor does not need to sign. If settlement is over six months or you don’t have finance approval, your guarantor must apply with you. You or your guarantor must have a property with sufficient equity to cover the deposit bond in case of a claim.
#10. How do I obtain a deposit bond?
Obtaining a deposit bond is easy. Simply talk to our team. We will liaise with the deposit bond provider on your behalf. Supporting documents depend on your application type, and we’ll tell you exactly what you need to provide. When the application is ready, we’ll send it to you for electronic signing. It’s that simple!
Have you got some questions we haven’t answered here? Talk to our team.
