A deposit bond is a guarantee to the Vendor equal to the amount of the deposit required. It effectively takes the place of a cash deposit between the time of exchange and settlement of the property.
It is quick, cost-effective and a convenient alternative to tying up your assets when needing to raise a deposit.
You can use a Deposit Bond to secure a property which may not settle for up to four years. This means you can continue to earn interest on your investments, avoid paying the high cost of a loan or securing a bank guarantee until it is time to settle the property.
Benefits for Purchasers:
- Deposit Bonds are Unsecured (ie., No mortgages or charges are taken over property assets).
- The Deposit Bond cost ranges between 0.3 and 1.255% of the purchase price and is calculated with respect to the term and value of the Deposit Bond required. This amount is paid once at the time of application. A fee is not charged if the applicant does not qualify for the deposit bond.
- Deposit Bonds generally have proved to be more cost effective than using your own savings, bank guarantees or loan monies.
- No loan approval is required to have a deposit bond issued on a bond with terms of 6 months or greater.
- Turnaround Time - from receipt of a satisfactory completed application and supporting documentation to approve and issue is 24 to 48 hours.
- Provides you with an opportunity to purchase the property of your choice whilst keeping assets untouched until needed at time of settlement.
Benefits for Vendors & Financiers:
- Each applicant is assessed in accordance with current Retail Bank and Loan Mortgage Insurance policy which constitute the underwriting criteria for this product.
- The mandatory requirement for DBA to issue is that each Applicant must prove they are bankable for the full purchase price plus costs.
- Broadens the purchaser market as often purchasers may only have sufficient liquid assets for a 5% deposit, whilst a Deposit Bond representing a 10% deposit may be provided to approved applicants.
Benefits for Property Consultants:
- Applicants are fully qualified as to their financial ability to complete the entire purchase.
- Expedites exchange of contracts for sale which in turn accesses commission payments faster.
Benefits for Solicitors:
- Expedites and streamlines the exchange process.
- Eliminates delays in waiting for purchaser’s funds or bank guarantees, to become available.
- By having a deposit bond this qualifies the purchaser’s financial ability to settle the property.