Why Use a Deposit Bond?

March 13, 2014
Stephen Rossiter

Deposit bonds (or deposit guarantees) are a substitute for the cash deposit required when purchasing a residential property – generally this is 10% of the purchase price (though this can sometime be negotiated down to 5%). They allow you to pay the full purchase price at settlement.


In many cases, customers may not have ready access to the cash deposit required to secure a property or may prefer a more cost effective alternative to using their own cash. This may happen when you:


• have sold your current home but funds are not yet available for the deposit • are a First Home Buyer and don’t have the full 10% cash deposit required


• are an investor and the loan funds are not available until settlement


• don’t want to pay the penalty for breaking a fixed investment or selling shares


• may want to attend more than one auction before you decide which home to purchase


• prefer to keep your savings earning interest until settlement


• want a cheaper and quicker solution to arranging a deposit, than securing short term finance


Here at Mortgage Choice we use Deposit Power to issue a deposit bond for short term guarantees to suit settlement terms of up to 6 months and is suitable for all types of residential property including vacant land.  Deposit Power also issue long term guarantees to suit settlement terms from 6 to 48 months, and are perfect for when you are buying properties off the plan, under construction or vacant land with extended settlements.


As an accredited agent of Deposit Power we can organise your deposit bond completely online. You need to have unconditional approval for your finance in place and we need to hold evidence of your funds to complete the transaction – if all this is finalised then the bond can produced in about 24 hours.


Deposit bonds can be used for private treaty sales or for auctions. For auction-goers the property details are left blank on the guarantee certificate which allows the customer to attend numerous auctions.  At your successful auction the property details and final price are completed – if the purchase price and deposit are lower than the original than the approved bond amount the bond is valid to a maximum of 10% of the purchase price – fee refunds are not provided is this is less than the original figure.


If you aren’t able to use your deposit bond within 30 days of issue and it is returned to Deposit Power they will refund your fee less an administration fee of $150.


Always check with the vendor’s agent to confirm they will accept a bond as a deposit. It is legal and available throughout all states and territories of Australia but acceptance is at the vendor’s discretion (ask your solicitor or conveyancer to check for you).


Obtaining a deposit bond is quick and easy – payment of the fee (1.2% of the deposit amount) is by credit card and Deposit Power are set up to despatch your bond urgently so you secure your property – in the swift-moving world of inner city real estate we are used to the degree of urgency required – if you have any questions about preparing yourself for purchase using a deposit bond please call us on 02 9698 1800.

Posted in: Home loans

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