There’s nothing like the excitement of finding your dream property. Jumping on the opportunity, however, requires you to have the cash ready to go, which is not always realistic. Deposit bonds are useful in these cases as they can bridge that gap – in most cases they’re turned around within 1 or 2 days. They’re a financial agreement that replaces a cash deposit as an interim measure. Reasons for not having a bond available include awaiting sale of a current property, or having cash tied up in investments or term deposits.
In most cases, deposit bonds are offered by a range of banks. Generally, the arrangement requires that the full amount of the bond is paid back in cash to the lender on an agreed date. There are also fees attached to the service which vary depending on the value of the property being purchased but are usually up to 1.5% of that price.
Deposited bonds do provide a good solution however the cost of them should be assessed against pulling money from other sources, depending on your circumstances. There is also the potential a vendor won’t accept the deposit bond as part of the contract – this should be investigated before applying for a deposit bond by speaking to the agent. If you are considering a deposit bond you should also know what your options are if the sale falls through. It should be clear that in the event of the purchase not going ahead, the fees will be fully or partially refundable.