Deposit Bonds
What is a Deposit Bond?
A deposit bond is a guarantee which can be a substitute for a cash deposit when signing contracts on the purchase of a property. It covers you from the period of signing contracts up to the day of settlement (usually 6 weeks later), when your loan has been set up and the full balance must be paid to the seller.
If you default under the contract of sale for the purchase of the property and will forfeit your deposit, the value of the bond may be claimed from the seller from the insurance company which has issued the bond.
When do you need one?
- When you only have a 5% deposit or less saved up, but the real estate agent wants 10% to secure the property for you.
- When you are borrowing 100% of the purchase price and costs by using the equity you have in another property.
- You have your 10% deposit invested but you don't want to use it and have it tied up for 6 weeks during the period from exchange of contract to settlement.
Cost of a bond
A deposit bond is relatively inexpensive, especially when you consider the cost involved in using your own funds or borrowing funds (interest). A deposit bond costs around 1.2% of the amount of the bond. For example on a purchase price of $300,000- you will need a deposit bond of $30,000- (10%) and this will have a premium of approx. $360-.
Helping you with Home Loans
There are some great deals right now due to strong lender competition that could save you thousands and some are negotiated at special rates available through Mortgage Avenue.
Contact Mortgage Avenue to make an appointment by calling us on
1300 885 008.
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