9 Most Common Questions About Deposit Bonds Answered
So, you’re thinking about getting a deposit bond?
Whether you’re a first home buyer, seasoned property investor, downsizing or buying off the plan, chances are you have a few questions.
Don’t worry – we’ve got the answers you need.
Here are the 10 most common deposit bond questions answered:
#1. When do I pay back the deposit?
You actually never “pay back the deposit” unless there is a claim. The role of a deposit bond is to “guarantee” you for the deposit amount right up until you get the funds at settlement. In other words, a deposit bond tells the vendor that you’re good for the money.
Then, at settlement, you pay the full purchase price plus the deposit and any additional costs, like stamp duty. The only money that is exchanging hands is the deposit bond fee, which you pay to the provider up-front.
#2. How much does a deposit bond cost?
It depends on the deposit bond amount and the required length of time. Talk to our team for a quote.
#3. Do I pay interest?
No – you only pay the one-off fee just before your deposit bond is released. That’s the brilliant thing about a deposit bond. To get an instant quote for your deposit bond please click here.
#4. I am buying off the plan – how long does the deposit bond need to be made out for?
In most cases, buying off the plan means the deposit bond needs to be issued up to the “sunset clause” date. The sunset clause date is a provision in off-the-plan contracts that allows either the vendor or the purchaser to rescind the contract if the title to the property has not been created by a specific date.
Find the sunset clause date in your contract of sale or ask our team to help. While you’re there, look out for a separate clause in your contract relating to deposit bonds – some vendors may request to add additional time on a deposit bond.
If you can prove that settlement occurred earlier than 6 months from the expiry date of the deposit bond, a pro rata refund can be obtained. The maximum refund applicable is 18 months. Terms and Conditions do apply – refer to your deposit bond application or bond provider’s website, or ask our team for help.
#5. Do I need to seek approval from the vendor to use a deposit bond to secure my purchase?
Definitely. Always check with the real estate agent or directly with the vendor to make sure they will accept a deposit bond instead of a cash deposit.
#6. How quickly can a deposit bond be issued?
Much faster than you think. Within 15 minutes, we can help you get preapproval. Within one business hour, we can have your application form ready for e-signing. And, once you return your signed application with the bond fee payment, your deposit bond can be ready in less than one business hour!
#7. Am I eligible for a deposit bond?
Each scenario is different, but you are typically eligible if:
- You hold formal finance approval, OR
- You have at least got conditional finance approval that is subject to valuation only, OR
- You are selling a property and funds from the sale are enough to purchase your new property outright.
If none of these apply, or when a property settles over six months, your deposit bond provider will need to conduct an asset, income and liability assessment. To be eligible, you or your guarantor will need to own a property with some equity.
The best way to check if you are eligible is to talk to our team.
#8. I am a first home buyer; can I get a deposit bond?
If you already have formal approval for your finance through a family guarantor loan, and your property settles within six months, you can typically obtain a deposit bond. The good news is there’s no need for your guarantor to also sign your deposit bond.
If settlement is more than six months or you don’t have finance approval, your guarantor will need to apply with you for your deposit bond. Your or your guarantor will need to have a property with the equity to release a deposit bond. This is to ensure the guarantor can pay back the deposit bond amount in the unlikely event of a claim on your bond.
#9. How do I obtain a deposit bond?
Obtaining a deposit bond is easy. Simply talk to our team. We will work with the deposit bond provider on your behalf, so you don’t need to add another thing to your list.
The supporting documents you need will depend on your application type, so we’ll tell you exactly what you need to provide. Then, when the application is ready, we’ll send it to you for electronic signing. It’s as easy as that!
Have you got some questions we haven’t answered here? Talk to our team at Conveyancing Services.