When your purchasing a property and your cash is tied up in other investments or you are buying off the plan and don’t want to part with your cash for over 6 months, a deposit bond will get you out of your fix.
Deposit bonds work as a promise to pay at settlement. They are underwritten by insurance companies and give the vendor security that you will pay your 5% or 10% whether you complete the purchase or not. It’s like handing over cash without actually doing it.
You are still contractually obligated within the terms of the sale contract.
The biggest advantage is that you don’t have to break term deposits or sell shares to meet your deposit requirements.
Bonds for six months have a nominal fee for their arrangement, generally 1.2% of the deposit amount. For example a $35,000 deposit bond would require a fee of $420.00 plus any applicable processing fee.
This is equivalent to three months interest on the $35,000 if you had it in term deposit paying 5% per annum.
The advantages as a vendor as significant as you can call on the deposit without the intervention of the buyer if they fail to settle. Your rights within the contract are maintained.
If you want to keep your cash as long as possible when buying a property, don’t go past the advantages of a Deposit Bond.
Our Greenspan staff will arrange one very easily as part of your loan application if required. Contact us for more info.
