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Deposit Bonds

A deposit bond is a substitute for the cash deposit required when purchasing a property.

Deposit Bonds

What is a Deposit Bond?

A deposit bond is a substitute for the cash deposit required when purchasing a property. Normally a 10% deposit is paid by the purchaser and held in trust until settlement when the purchaser pays the remaining 90%. A deposit bond is effectively a guarantee to the vendor equal to the amount of the deposit required. It is a cash substitute for the term between signing the contract and settlement of the property.

Deposit bonds can be issued for all or part of a deposit, but are usually for 10% of the purchase price. For as little as $230 you can use a deposit bond to secure that dream property today! It is a simple process and we are able to approve a deposit bond in as little as 24 hours. This could be a handy advantage when racing to beat out that other buyer to exchange.

The guarantee is provided by QBE to the vendor on the understanding that the purchaser will pay the full purchase amount on the settlement date. When applying for a deposit bond, the purchaser will sign a counter indemnity agreement to confirm this. Under the counter indemnity agreement, the purchaser gives a legally binding right to QBE to pursue recovery against the purchaser for any part of the deposit bond amount that QBE pays the vendor, if the purchaser defaults under the contract of sale.

Why do people use them?

Many people don’t have the ready cash for a 10% deposit when they enter into a contract on a property. First home buyers often have very little cash and are relying on the First Home Owner grant and borrowing the rest of the cost of the property. The Government Grant and the finance are generally not available until the new home settles which doesn’t help when it comes to a deposit so a deposit bond is the perfect alternative.

People with existing homes generally have their cash tied up in their current home or other investments. They may want to finance the entire loan amount using their existing equity. Covering a deposit can mean either expensive bridging finance or other borrowings. Regardless of where the finance is obtained, interest charges, establishment fees and other up-front costs connected with the loan can be more expensive and time-consuming to arrange. There are a multitude of reasons why you could use a deposit bond.

  • You can secure a property even if you have no cash
  • Savings and Investments can remain intact
  • A deposit bond can be approved in as little as 24 hours*
  • There is no need to draw down finance and pay interest on the property before it has settled
  • You can avoid the expense and time delays involved in bridging finance
  • You can purchase “off the plan” residential properties which have longer settlement times
  • You can use a Deposit Bond at Auction
  • Deposit Bonds are available for most properties and settlement terms
 

Do vendors accept them?

Most vendors and agents will accept a deposit bond, but it is the sole discretion of the vendor as to whether they accept them or not. You definitely need to check and you need prior consent to use them at auction. Once approved, deposit bonds can be issued same day.

What is the next step?

To submit an application you can either call our Directlink member service team on 1300 368 555 or visit your local WAW Customer Service Centre to make an appointment. More importantly, you can organise your deposit for that sought after property in as little as 24 hours* so you can get on with the important task of making the purchase.

* 24 hour approval subject to receipt of completed application and associated documentation