What is a Deposit Bond?
When a person buys a property to occupy as their home, investment, commercial or land, they are
required to pay an immediate deposit (usually 10%) of the purchase price to the vendor in order to exchange contracts.
A deposit
bond is a guarantee that acts as an interim substitute for a cash deposit, meaning the payment of the deposit can be made at the time
of settlement rather than immediately upon exchange of contracts.
How does a deposit bond work?
Deposit bonds, underwritten
by major insurance companies, guarantee to the vendor that payment of the deposit will be made at the time of settlement, as opposed
to paying the deposit in cash when exchanging contracts.
The person buying the property is still required to pay the deposit,
however, with a deposit bond; they can pay the deposit at the same time they are required to pay the balance of the purchase price
(i.e. at the time of settlement).
Do I still have to pay the deposit at settlement?
Yes. The bond is a substitute for the cash deposit stated in the Contract of Sale. It does not remove your obligation to pay this deposit to the vendor at the settlement date
How much do Aussie Deposit Bond cost?
Aussie Deposit Bonds are a cost effective alternative to other forms of financing the deposit. The fee depends on the amount of the deposit and the term the bond is issued for.
When does the bond terminate?
The bond terminates when
- the Contract
of Sale is completed.
- When the Guarantor pays a claim, or
- the Vendor terminates or rescinds the contract.
