A deposit bond, sometimes referred to as a deposit guarantee, is an insurance policy that is used in place of the cash deposit required between signing the contract of sale and settlement. Just like a cash deposit, a deposit bond guarantees a purchaser’s commitment to an unconditional contract of sale.

The main benefit for buyers using a deposit bond, is that they can defer paying the deposit until Settlement. Deposit bonds can help if you want to purchase a property but don’t have immediate or convenient access to a cash deposit – but you will by the time of settlement.

You can watch a video on what a deposit bond is here>

• A First Home Buyer, borrowing 100% of the purchase price plus costs, through a parental guarantee or family pledge arrangement, with the loan funds only available at settlement;
• A Purchaser who simply does not have the cash deposit or enough cash available when entering into a contract of sale;
• A Property Investor who has their cash tied up in property and are cash poor today;
• Downsizing or Upsizing, where you are looking to buy and sell simultaneously, with your cash locked away in the equity of your home you are selling or plan to sell;
• Applying for a Bridging Loan that allows you to purchase a new home before finalising the sale of your existing one. A deposit bond will give you the ability to exchange on your property prior to settlement of your sale purchase;
• Buying off-the-plan with longer settlements, looking to keep your access to your cash where it may be working harder for you.

Whatever the reason deposit bonds may be a viable alternative that can make it easier for you to purchase property or land.

Getting into the property market can be frustrating. Once you’ve found a property you love and can afford, you’re faced with an even bigger challenge:

How do you get access to the 10% deposit? 

The good news is there’s a solution that is increasingly popular amongst first home buyers who simply don’t have enough cash sitting in the bank for the deposit: deposit bonds. 

Think of a deposit bond as an IOU for the deposit amount you need to secure your property. You use the deposit bond in place of the cash deposit required between signing the contract of sale and settlement. Just like a cash deposit, a deposit bond guarantees your commitment to an unconditional contract of sale. Then, at settlement, you pay the full purchase price, including the deposit amount and other costs (stamp duty, etc). 

Deposit bonds are a flexible option when using a family guarantor.

Maybe you’ve asked mum and dad to leverage the equity in their home so you can get a family guarantee loan. The next hurdle is how do you come up with the cash deposit or supplement the savings you have worked hard to save? A deposit bond is the convenient option because you don’t have to provide the cash until settlement, when your finance comes through.  

You can apply if you:

• Are a sole Proprietor, a Partnership, Company, or Trust (other structures may be eligible)
• Proprietors/directors/partners are all over 18 years of age
• The business has positive financials
• Are not bankrupt
• Are an Australian company or a company registered in Australia
• Have not had credit bureau defaults in the last 5 years

You will need to have been in business for a minimum of 2 years and will need to provide the following:

• Business plan detailing business management experience, and
• 12 month cash flow forecast
• Your last 3 years’ financial statements
• Copies of interim business financial figures
• Copies of personal taxation returns for all business partners or directors
• The current value of any personal assets and liabilities of all business partners and directors
• Balances of any existing business loans/lines of credit
• You may need to provide a copy of your Australian Taxation Office (ATO) Tax Portal Activity Statement and ATO Tax Portal Itemised Account (no more than 3 months old).