A deposit bond is a guarantee that can stand in place of a cash deposit under a property contract. The buyer still has to pay the full purchase price at settlement, and the seller must agree to accept the bond.
To obtain one, the buyer applies to a deposit-bond provider, supplies financial and property documents and pays a fee if approved. The bond amount, expiry date and contract conditions must fit the purchase.
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How A Deposit Bond Works
The provider promises to pay the deposit amount to the seller if the buyer defaults under the bond terms. The bond does not reduce the amount due at settlement and does not replace home loan approval.
Types And Term
Short-term bonds may suit an ordinary settlement period. Longer-term bonds can be used for some off-the-plan purchases. Provider definitions differ, so compare expiry rules and extension options before making a choice.
How To Apply
- Ask the seller and conveyancer whether the contract permits a deposit bond.
- Confirm the amount and required expiry date.
- Provide the contract and loan evidence.
- Supply any other financial documents requested by the provider.
- Review the fee, exclusions and default terms before accepting the bond.
Approval can depend on the buyer’s financial position, credit history and evidence that settlement funds will be available. The deposit-bond application process is separate from the lender’s credit assessment.
Costs And Risks
Fees vary by provider, bond amount and term. Compare the full terms and the provider’s customer service if timing is tight. A fast issue process does not cure a contract that rejects deposit bonds.
The buyer may owe the provider if the bond is called. Before an auction or exchange, obtain legal confirmation that the proposed bond satisfies the contract and make sure the expiry allows enough time for settlement.
