What is a Deposit Bond?

You need to exchange contracts – don’t have 15% or 20% cash……what do you do?

A deposit bond is a guarantee usually issued by an insurance company to the seller/vendor. It acts as a substitute for the cash deposit between signing a contract and settlement of the property.

At settlement the buyer/purchaser is required to pay the full purchase price including the deposit. The use of a deposit bond does not remove the obligation of the buyer/purchaser to pay the full deposit upon settlement. Acceptance of one in lieu of a cash deposit is at the sole discretion of the seller/vendor.

The deposit bond terminates on settlement of the property, when the contract is terminated, rescinded or the expiry date has passed, whichever comes first. It also terminates when a claim is paid by the issuer. Bonds can usually be arranged much faster and for less cost than any bridging finance options and can be used at auctions.

Deposit bonds are secure because payment is guaranteed by the insurance company issuing the bond.

Speak your mortgage broker or solicitor/conveyancer if you will require a deposit bond, and they will be happy to assist you.

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