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What exactly is a Deposit Bond?

The seller of the property you are buying takes a 'deposit' so that they will not be left out of pocket if you cannot pay for the property. But raising a deposit is not very easy at short notice.

A deposit bond provides a way of assuring the seller of your intentions without the need to fund the full deposit. Instead of handing over 10% of the property's value in cash, you buy the seller of the property an insurance policy. If you don't come up with the money, the insurance company will then pay the seller the 10% deposit. A deposit bond secures the property for you until settlement.

Who benefits from Deposit Bonds?

Deposit Bonds are useful in a variety of situations such as:
- People buying a property off the plan.
- Purchasers waiting for funds to come through from another source.
- Investors who have equity in their home but no actual cash deposit.

Types of Deposit Bonds

There are 3 different kinds of deposit bonds, all of which have different features:

A bond issued on approval from a lender.

This deposit bond requires minimal documentation, as it copies the lender's own approval process.

A bond not requiring approval from a lender.

Because there is no lender's approval, this kind of bond is more involved and the paperwork involved is similar to that involved in applying for a loan.

A "low docs" deposit bond.

This bond is secured on available equity in existing property of yours. You will need to certify your income for this type of deposit bond.

For more information on how Deposit Bonds can help you, please contact Fusion Finance today.