What is a Deposit Bond?

February 23, 2015
Ian Robinson

Why you might want to use a deposit bond

There are various reasons for using a deposit bond rather than putting down a cash deposit to secure your new home. Some of the common ones are listed below.

Cheaper alternative to bridging finance

If you're waiting on funds to come through from the sale of another property, a deposit bond can be a cheaper alternative to bridging finance and it gives you, as the buyer, reassurance that the new property will be held until you settle your own property sale.

Maximise interests earned on savings

Since no cash is required upfront when a deposit bond is used, your savings can remain intact and continue to earn interest while you wait for settlement to occur, which could range from a few weeks to a few years (if you're buying off the plan).

Use at multiple auctions

While the deposit bond amount is fixed, the vendor and property details can be left blank for you to complete, should you become the successful bidder at an auction. This is particularly handy if you are attending multiple auctions. Bear in mind that you need to get prior consent from the auctioneer to use a deposit bond. 

Buy property off the plan

Long term deposit bonds could last up to 4 years, which can be very useful in buying properties off the plan. You need to firstly check that the developer accepts deposit bonds, and if they do, you'll have some extra time to save up for your property plus earn as much interest as possible on your savings until settlement takes place.

 

- See more at: https://www.mortgagechoice.com.au/home-loans/home-buying-advice/tips-and-tools/deposit-bond.aspx#sthash.NKVs8m0V.dpuf

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