HOME > BLOG > Home Loan Advice > Deposit Bonds - A quick guide

A deposit bond is a guarantee that can be used instead of paying cash when you exchange contracts on a property purchase.

What are they?
A deposit bond is a guarantee that can be used instead of paying cash for the deposit when you exchange contracts on a property purchase.

When can it be useful?
Deposit bonds can be useful if you don’t have the cash readily available or don’t wish to use your own funds for the deposit. The guarantee is in place until settlement when you will need to come up with your contribution as usual.

How it works?
To be issued a bond, you need to show that you have sufficient funds available to complete the purchase at settlement. A certificate is then issued guaranteeing the deposit amount. You need to confirm that the seller is willing to accept a deposit bond in lieu of a cash deposit.

How much does it cost?
There are different bonds available for different situations. Short term deposit bonds apply for up to 6 months which suit a normal purchase. The cost is a percentage of the deposit amount, usually around 1.3%, with a minimum set at $165. Long term bonds can be used for settlement terms from 6 to 48 months, useful for extended settlements and purchases off the plan. The cost of these are determined on a case by case basis.

How do you apply?
A deposit bond requires an application to be completed and documentary evidence supplied. This can include documents confirming your identification, loan approval conditional on valuation, bank statements and the like evidencing where the balance of funds will come from at settlement.

How long does it take to get one?
If all the information is on hand, then it can be issued as quickly as 15 minutes.

Call to speak to our lending specialists on 13 72 62 or email ask@statecustodians.com.au, to discuss your specific requirements.