Deposit Bond
A deposit bond (guarantee) takes the place of a cash deposit required between the time of exchange and settlement of the residential property you are buying This guarantee is a convenience for you the purchaser, as it alleviates the burden of trying to access cash to raise deposit monies. It also means you must pay the full amount of the purchase price including the amount of the deposit at settlement. The deposit bond can secure your right to purchase for up to four years, whilst your investments can continue to yield a higher return than standard bank interest. The Vendor accepts the guarantee from the Underwriter. This guarantee can only be “cashed–in” should you as purchaser not settle thereby entitling the vendor to take your deposit. In this event, the deposit bond is claimed and the Underwriter must pay to the Vendor any outstanding deposit monies limited to the face value of the deposit bond.
How long are the deposit bonds?
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.
What 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.
Who is the guarantor?
The underwriting entity making the promise to pay the Vendor also makes payment to the Vendor as required.
Deposit Power
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Deposit Power is a division of Vero Insurance Limited ABN 48 005 297 807. Deposit Power Guarantee issued by Vero Insurance Limited. |
When 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.
Why would I use a Deposit Bond?
By using a 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 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.
How long does it take to get a Deposit Bond?
If you have been formally approved for a loan, deposit bonds generally take around 10 minutes to arrange, if using the services of Mortgage Buddy.
Apply Here For Your Deposit Bond
How much does it a Deposit Bond cost?
You will be quoted an amount based on the fee structure of the different deposit bond providers, however, t he cost ranges between 0.3 and 1.255% of purchase price. The fee is payable on application and is only refundable if the applicant does not qualify or elects not to proceed prior to the issuing of the deposit bond.
Will I qualify for a Deposit Bond?
If you have been formally approved for a loan you will qualify for a deposit bond, otherwise standard rules of assessment will 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.
Who benefits from a Deposit Bond?
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.
- The Property Marketeer: through selling to a purchaser who may not have or elect not to use a cash deposit, however has had their financial capacity to settle qualified.