Deposit Bonds

If you are purchasing a property, and you don’t have your deposit readily available, then a deposit bond may be your answer. A deposit bond is a guarantee, issued by an insurance company, to the vendor of the property you are purchasing, that they will receive their 10% deposit, even if the purchaser defaults on the contract of sale. The deposit bond is used in lieu of cash. You, the purchaser, are able to provide this guarantee to the vendor by paying a small premium to the insurance company.

Some typical situations where you may need to use a deposit bond include:

  • The vendor requires a 10% deposit but you only have 5% and you are borrowing 95% of the purchase price
  • You have the deposit but it is tied up in investments and will take too long to liquidate
  • Your deposit is coming from the proceeds of the sale of another property that is either settling before the purchased property or at the same time
  • You have the deposit funds sitting in a term deposit but you will incur a penalty if you withdraw those funds
  • You have funds available in redraw in your current mortgage but prefer to leave them in the loan to save on interest

You are borrowing 100% of the purchase price using equity in another property but those funds won’t be available until settlement.

Types of Deposit bonds

At Mortgage World Australia we can assist you with the following types of home loans –

  • Short term deposit bonds
  • Long term deposit bonds

Deposit Bonds Fast Find

Short term deposit bonds

Short term deposit bonds
  • Maximum settlement period of 6 months
  • Evidence of finance approval is required

Long term deposit bonds

Long term deposit bonds
  • Maximum settlement period of 48 months
  • Finance approval isn’t needed but a more stringent approval process if followed

Frequently asked questions

Not sure? Have additional questions? Try here –

I don’t have any savings or investments and I don’t own a property. Can I use a deposit bond to purchase a property?

No. A deposit bond doesn’t replace the need to have a deposit. You still need to prove to the deposit bond issue that you have the capability of settling on the property.

Will the issuer of the deposit bond take my property as security?

No. Deposit bonds are unsecured.

How long does it take to obtain a deposit bond?

A short term bond can usually be issued within 24 hours. A long term bond can take up to 48 hours to issue.

Do I need to have a loan approval in place to obtain a long term deposit bond?

No. When applying for a long term deposit bond the issuer will require extra documentation from you such as evidence of income and savings and will do some calculations to determine whether you have the financial ability to qualify for a loan at the time of settlement and can therefore complete the purchase.

I have signed an unconditional contract of sale to purchase a property and I have used a deposit bond in lieu of cash. I no longer wish to proceed with the purchase and want to pull out of the contract. What will happen?

Firstly you would need to seek legal advice before reneging on a contract. If you were to default on the contract the vendor could seek payment of the deposit from the deposit bond issuer. The deposit bond issuer would then seek reimbursement of

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