Residential Deposit Bonds
This is not insurance, but rather a form of financial instrument or guarantee which can represent your deposit until settlement when buying a residential property.
When purchasing a property, it is common practice to lodge a cash deposit of up to 10% of the purchase price with the vendor’s solicitor as security. For a small fee, a Residential Deposit Bond can be used in lieu of the cash deposit and guarantees the Vendor that you will pay your deposit on the day of settlement.
The Deposit Guarantee Bond can be used for all or part of the deposit required up to a maximum of 10% of the purchase price.
Residential Deposit Bonds are offered for terms of 3 months - 5 years
Features & Benefits
Cash Flow
When financing a deposit, Residential Deposit Bonds greatly improves cash flow, especially compared with expensive alternatives such as credit cards, lines of credit, personal loans or bank guarantees.
Convenience
With an Residential Deposit Bond there is no need to borrow against an existing property to access equity or go through the laborious process of organising a bank guarantee. With an Residential Deposit Bond, the working capital will remain working.
Assessment Criteria
Our Residential Deposit Bond underwriter uses experienced assessors who understand client‘s business and financial needs. Meaning, the assessors are able to identify strong customers where others are not and hence, qualify for greater deposits.
Guarantors
Our Residential Deposit Bond underwriter accepts guarantors to assist qualifying when a client’s acceptable asset base is low, particulalry where the purchaser is a corporation with a low paid up capital value. In this case the guarantee of a financially asset strong director will almost certainly be required.
Self Certification
When electing to self certify income (commonly known as Lo-Doc), bonds can be approved without the need for a client’s financials at no additional cost.
No need for Finance Approval
Residential Deposit Bonds approvals are not usually restricted if a client’s finance has not yet been approved, however, will be dependant upon the financial strength of the applicant, and will be subject to to an application being completed. .
Cost Effective
The efficient and innovative patented structure of Residential Deposit Bonds allows them to be very competitively priced.
24 Hour Turnaround
Our Residential Deposit Bond underwriter perform bond application assessments within 24hrs.
Higher Bond Amounts
We are able to arrange and have approved higher bond amounts up to 25% of the customer’s acceptable asset base. This compares to our competitors standard, typically 15% – 20%.
Longer terms
We specialise in long-term, Residential and Commercial Bonds:
Terms: 3 months – 5 years.
Tailored Solutions
We can tailor bond amounts above $.5 million AUD (on application).
Outlaying a large cash deposit (for example $50,000 on a $500,000 property can be complicated or impractical if buyer’s funds are already tied up in an existing property or other investments. The convenience of using a Residential Deposit Bond will attract some buyers having difficulty accessing the full cash deposit. The Residential Deposit Bond is legally effective and accepted by sellers in all States and Territories.
Anyone wishing to purchase a residential property can apply for a Residential Deposit Bond. This may include existing property owners wanting to purchase property, investors wanting to expand their property portfolio, property developers and first home buyers.
Yes. The flexibility of a Residential Deposit Bond is one of its key features. A Deposit Bond Deposit Guarantee can be issued prior to an auction. The Bond amount is fixed but not the property details, so buyers can attend a number of auctions. The purchaser simply completes the vendor and property details on the Guarantee Bond Certificate when they are the successful bidder.
Will the seller / vendor accept the Equity Bond?
The Residential Deposit Bond is legal. It is available for residential property purchases in all states. It is at the sole discretion of the vendor to accept it. However, the seller is often anxious to obtain a Contract of Sale on the property and secure a deposit commitment from the buyer. A Residential Deposit Bond can usually be organized within 24 hours of the contracts being signed.
The Residential Deposit Bond ceases when the Contract of Sale is completed, terminated, rescinded or the Guarantee Bond expiry date occurs, whichever happens first. The Deposit Guarantee Bond also terminates when a claim is paid by the Deposit Bond underwriter, the Guarantor.
What happens if the buyer defaults under the Contract of Sale?
If the buyer defaults under the Contract of Sale, the seller is entitled to retain the deposit. The seller can claim the Guaranteed amount from the Deposit Bond underwriter. This amount will be paid to the stakeholder nominated in the contract within two clear days of the Deposit Bond underwriter being supplied with the necessary documentation. The Deposit Bond underwriter will then recover the money from the purchaser.
Why do buyers and sellers like residential Equity Bonds?
Property purchasers are in favour of using a Residential Deposit Bonds because it allows them to keep their cash until settlement. Shorter term guarantee bonds (up to 6 months) appeal to homeowners upgrading to a new property or investors who wish to purchase property when the opportunity arises, but have funds tied up in non-liquid assets. Longer term guarantee bonds appeal to people who are buying property under construction or off the plan, therefore not tying up liquid assets for extended periods of time.
Vendors accept Residential Deposit Bonds because it acts as a financial guarantee and can assist in the sale of their property.
Does an Equity Bond cost less than other deposit options?
Yes, compared with the interest costs associated with financing a cash deposit by other means, the Residential Deposit Bond is a very cost effective option.
The ease of obtaining an Residential Deposit Bond is one of its main attractions.
Applications can be downloaded completed and faxed to our head office. A Residential Deposit Bond will normally be issued within 24-48 hours. Please click here to make an on-line enquiry