Deposit Bonds allow you to purchase a home or invest in property without having to provide the deposit in cash. A Deposit Bond Guarantee is a substitute for the cash deposit required when purchasing a residential property – you simply pay the full purchase price at settlement.
Both short and long term guarantees are offered to suit any settlement terms. They can be either short term or long term.
Short Term Deposit Bonds
Are available for purchases where the settlement terms are up to 6 months. Short term guarantees are issued subject to issuing guidelines. Purchasers need to provide evidence they have sufficient funds available to complete the purchase.
Long Term Deposit Bonds
Are available for purchases where the settlement terms are between 6 and 48 months. These can be arranged for applicants who own existing residential property and demonstrate the ability to complete the purchase.
There is a charge associated with this. Usually it’s around 1.2% of the 10% deposit required.
Is a form of deposit that is used regularly when you are purchasing real estate where the land or plan of subdivision is not yet registered or the dwelling it not yet built.
It is predominantly used as the preferred form of deposit when purchasing a property Off the Plan.
How a Bank Guarantee Works
Normally when you purchase a piece of real estate you are required to pay a 10% deposit. This is usually done by transferring the required deposit into the real estate agent’s Trust Account. When you are purchasing a property Off the Plan or purchasing un-registered land a Bank Guarantee is often the preferred method.
Instead of handing over your hard-earned cash and letting it sit in the real estate agent’s Trust Account or the vendor’s solicitor’s Trust Account allowing them to earn interest, you deposit the money into a secure savings account that is in your name, usually with one of the 4 major banks. You accrue the interest for the period of time the money is in the savings account.
The account is in your name, however the Title to the savings account is handed over to the vendor’s solicitor and at settlement the funds in the account will be handed over to the Vendor in return to the vendor handing back the Title to the account.
The account may be in your name, but whoever holds the Title to the account owns the money upon release.
If you are purchasing a property Off the Plan then most developers will only accept the deposit being paid in the form of cash credited to their solicitor’s Trust Account, in which it is held until settlement or a receipt of a Bank Guarantee which the developer’s solicitor holds until settlement.