Guide to Deposit Bonds
Save time, money and stress with deposit bonds.
Deposit bonds are a substitute for the cash deposit you need to pay when buying a home. They give you the freedom to concentrate on finding the right property, and keep your savings earning interest right up until the day of settlement. Read on to find out more about deposit bonds, including when you might use them, how much they cost and how to apply.
The deposit on a home purchase is normally paid when contracts are exchanged, or at auction when you’re the the successful bidder. A deposit bond is an alternative to paying the deposit with your own immediate funds. Deposit bonds can be issued for all or part of your deposit, usually up to 10% of the home purchase price. Once you’ve settled, the deposit needs to be paid back to the lender.
Benefits of deposit bonds:
Standard deposit bonds are available for settlement periods of up to 6 months. Longer term deposit bonds are also available for 6-48 months which suits people buying ‘off the plan,’ under construction or land with an extended settlement.
Remember that deposit bonds replace the need for a cash deposit, but they don’t remove your obligation to pay the full deposit and purchase price at settlement.
Ask a Mortgageport expert if deposit bonds are right for you. Call 1800 100 747 now, with no charges or obligations whatsoever.
You might consider deposit bonds when:
The cost of a deposit bond depends on the property value and length of time to settlement. At the very least you can expect to pay around 1.2% of purchase price. It’s a one-off fee that’s usually partly refundable if you don’t use it.
Example: you’re buying a home for $500,000 and need a 10% deposit of $50,000. It would cost you around $600 for a deposit bond.
The cost savings can be considerable.
For example, the fee for a $30,000 deposit bond is $360.
By comparison, a short term loan may cost you $727 based on an application fee of $450 (often 1.5% of the borrowed amount), plus interest payable of $277, assuming an 8% interest rate over six weeks.
By using a deposit bond, you save around $367.
Mortgageport makes it easy to apply for a deposit bond. Contact Mortgageport and complete an application form to show us that you have sufficient funds to complete the purchase at settlement. You can demonstrate this with: