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.
Struggling to get access to a 10% cash deposit for your property purchase? You’re not alone.
Whether you’re a first home buyer, downsizing, or investing, getting the deposit together is one of the major hurdles facing home buyers today.
But more and more Australians are realising there’s a smart alternative to a cash deposit: a deposit bond.
In this article, we’ll cover what you need to know about deposit bonds, so you can decide whether it’s the right solution for you.
What is a deposit bond?
Also known as a deposit guarantee, a deposit bond is used in place of the cash deposit required between signing the contract of sale and settlement.
Think of a deposit bond as an IOU for the deposit amount you need to secure your property. Just like a cash deposit, a deposit bond guarantees your commitment to an unconditional contract of sale. Then, at settlement, you simply pay the full purchase price, including the deposit amount and any other costs, like stamp duty.
The only money that changes hands upfront is the deposit bond fee, which you pay to the provider.
What it is not
There can be confusion that a deposit bond can be used as a deposit to help secure finance from your bank or lender. That’s not the case.
A deposit bond can only be used as the deposit (up to 10%) to guarantee your commitment to the purchase of real estate or land to the vendor.
Why use a deposit bond?
Deposit bonds are a smart option if you want to purchase a property but don’t have ready access to a cash deposit — but you will by settlement. You might be a first home buyer who simply doesn’t have enough cash in the bank for the deposit. Or you might be downsizing to a smaller property, but because you haven’t yet sold your current home, your deposit is still tied up.
3 facts you need to know about deposit bonds
Fact 1: A deposit bond guarantees up to 10% of the purchase price
A deposit bond provider guarantees you for the deposit bond amount right up until you get the funds at settlement. This gives comfort to the vendor that you are committed to the sale. Always check with the real estate agent,
