1When would I use a deposit bond?
Buying a house, unit, or land with freehold, strata or leasehold title whether by private treaty, at auction or off-plan.
2Why would I use it?
By using the deposit bond you can continue to save your savings. There is no need to sell shares or mortgage any assets to raise the deposit monies which could lead to the potential loss of benefits through needlessly breaking investments. Your costs are less, because there is a once only payable fee and also the deposit bond does not need to be secured as does a bank guarantee. It is cheaper than paying interest or the costs of re-financing prematurely.
3How long are the deposit bonds good for ?
Deposit bonds can be issued with terms ranging from 3 months to 48 months. The sunset date stated in the Contract for Sale usually determines the term needed.
4Who can qualify?
You must be able to prove that you can settle the property. It is a similar process to that of a standard loan application, including assessment of adequate income and sufficient equity to meet current and proposed financial commitments. Standard rules of assessment apply, you also need to be an Australian resident or corporate entity. Purchasers using deposit guarantees have been 1st home buyers, retirees, investors, and lifestyle seekers.
5How long does it take to get the deposit bond?
If you are able to use the finance backed (6 months) application form – the usual turnaround time is 24 hours from receipt of all necessary documents.
If you need to use the equity backed application form – the usual turnaround time is
24 – 48 hours from receipt of all necessary documents
6What are my obligations?
If you fail to settle the property thereby breaching your obligations under the Contract for Sale, the Vendor may become entitled to the forfeiture of your deposit. The underwriter will then receive a claim from and subsequently pay to the Vendor the deposit monies in accordance with the commitment as guarantor. Pursuant to the terms of the Indemnity agreement contained in your application form you are liable for this debt and therefore must reimburse the underwriter. Failure to do so will result in the Underwriter instigating recovery proceedings with full recourse against you.
7Who is the guarantor?
The underwriting entity making the promise to pay the Vendor also makes payment to the Vendor as required.
The Purchaser: through securing the opportunity to purchase a property.
The Vendor: through selling to a qualified purchaser. Also, in the event of the Vendor becoming entitled to forfeiture of the deposit, the Underwriter of the guarantee pays the monies owing to the Vendor or its nominated representative.
The Vendor’s solicitor: a streamlined and expedited exchange process.