Deposit bonds are generally used as substitutes for actual cash when paying a deposit on a property purchase. They act in a similar way to an insurance policy, where the deposit bond provider issues an assurance to the seller of the property that they will pay the deposit if the buyer can't do so (in certain circumstances).
Some advantages of using a deposit bond are...
- Instead of tying up valuable cash savings, a deposit bond can sometimes suffice until settlement of a property. This is particularly useful when there is a long settlement and you would prefer to keep your cash where it can continue earning you interest.
- They assist with "off-the-plan" purchases, where you are committing to purchase a property for which construction is not complete. A deposit bond could secure your claim on the property without committing actual funds before it is complete.
- When you are purchasing at auction a deposit will generally be required once the gavel falls. Providing a a deposit bond instead means you don't need to have the cash ready to present on the day. Note, you would need to check whether deposit bonds are accepted prior to the auction.
If you think you might need a deposit bond, or aren't sure whether it would work for your situation, please
contact us at Beyond Home Loans.