What is a Deposit Bond?

July 02, 2014
Chris Smith

A deposit  bond is essentially a means to bridge the gap of a deposit for the purchase of a property when the physical cash is not available initially. It is provided in the form of a guarantee to the seller for the deposit monies - to be paid in the event a purchase contract is completely breached.

The deposit bond would typically be used in situations where the purchaser does not have the physical cash for the deposit until the final loan and settlement is drawn down. It provides a guarantee to the vendor that the deposit money is secure.

One drawback can be that the vendor selling the property cannot claim items such as section 27 (where the vendor accesses deposit funds for the deposit on their next purchase) as there is no physical cash to access, only a guarantee that the cash will be paid in breach of the contract.

If you'd like to learn more about how deposit bonds work or if one would suit your needs, please give us a call at Mortgage Choice in Cheltenham on 03 9585 7779 or through https://www.mortgagechoice.com.au/anthony.smith

Posted in: Home loans

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