Deposit Bonds
It shouldn’t be harder than it needs to be…
So you’ve purchased a unit off the plan, or maybe you have an extended settlement period. Deposit Bonds, sometimes known as Deposit Guarantees are often confused with Bank Guarantees.
The facts,
- A deposit bond/guarantee is an insured guarantee to pay an agreed sum of money (deposit) to a vendor in the event of a contract termination or contract breach.
This type of deposit is used in lieu of using your own cash or equity in property. However this should not be confused with eliminating the commitment of a deposit within a property contract. Beware, should the property contract be terminated or breached in the vendors favor then the vendor is entitled to claim the deposit from the insurer who provided the deposit bond/guarantee. The insurer then will recoup this amount of money from you. - Not all developers will accept a deposit bond/guarantee.
- Not all deposit bond/guarantees are the same.
- A bank guarantee requires your cash assets to the equal value of the bank guarantee to be frozen whilst the guarantee is in force. A bank may use equity as opposed to cash to issue a guarantee and this involves freezing equity within any property holdings.
Unlike a deposit bond/guarantee, bank guarantees require real cash or equity to produce.
The myths uncovered,
- Short term (i.e. zero to six month term) deposit bond/guarantees require finance approvals to obtain the deposit bond/guarantee.
- Long term (i.e. seven months to three year term) deposit bond/guarantees require real estate equity to obtain.
- Unlike bank guarantees, deposit bond/guarantees, if claimed by a vendor, generally require the contract to also be terminated. While you may have lost your deposit in this instance, you are not still committed to a legal contract.
The process really is quite simple,
- Call us now to speak with a mortgage specialist.
- Meet to organise a suitable solution.
- Leave the rest to us.
