What is a Deposit Bond?

A deposit bond, or guarantee issued by a leading Insurance Company to the vendor. It acts as a substitute for the cash deposit between signing a contract and settlement of the property. At settlement the purchaser is required to pay the full purchase price including the deposit. The use of a Deposit Bond does not remove the obligation of the purchaser to pay the full deposit upon settlement.

The Deposit Bond can be issued for all or part of the deposit amount required, up to 10% of the purchase price. Acceptance of the Deposit Bond in lieu of a cash deposit is at the sole discretion of the vendor.

Worforce Finance Deposit Bond products available include:

• Short Term Guarantee - with an expiry date of 6 months
• Long Term Guarantee- for purchase contracts where the Sunset Clause is between 6 and 48 months

Should the purchaser default under the contract of Sale/Offer and Acceptance, the vendor can claim the amount guaranteed from the Insurance Company. The Insurance Company will the seek to recover this amount from the purchaser.

Deposit Bonds was introduced into the Australian market by our Insurance Company in 1989 and is legally effective in all Australian States and Territories.

How does a Deposit Bond Work?

Deposit Bonds are a simple, efficient and inexpensive alternative to cash or bridging finance deposits when purchasing a property.
When a person buys a house or unit to occupy for an investment, they are required to pay an immediate deposit (usually 10% ) of the purchase price to the vendor in order to exchange contracts.

A Deposit Bond is a guarantee that acts as an interim substitute for a cash deposit, meaning the payment of the deposit can be made at the time of settlement rather than immediately
upon purchase.

Private Treaty (Non Auction)

1. Determine property to be purchased and agree price with agent / vendor.
2. Ensure sufficient funds will be available for contract completion ( finance approved, existing funds to be available, definite sale of current property).
3. Apply for Power Deposit Guarantee including a copy of contract and other required information.
4. Deposit Power Guarantee approval issued.
5. Sign contract including deposit guarantee details and any other conditions.
6. Deposit Power Guarantee given to stake holder (Real estate Agent / Solicitor ) as a deposit commitment.
7. Contracts exchanged (properties in Victoria only, not required for other States or Territories).
8. Settlement occurs with full purchase price being paid.
   

Auction

1. Ensure sufficient purchase funds will be available for contract completion (finance approved, existing funds to be available, definite sale of current property).
2. Conduct any necessary checks prior to auction
3. Ensure that Auctioneer and vendor are prepared to accept a  Deposit Power Guarantee at least two days prior to the auction.
4. Apply for Deposit Power Guarantee including a copy of contract and other required information.
5. Deposit Power Guarantee approval issued.
6. Successfully bid at auction. ( If not, Deposit Power Guarantee is still valid for other auctions.
7. Sign contract including deposit guarantee details.
8. Deposit Power Guarantee given to stake holder, ( Real estate Agent / Solicitor ) as a deposit commitment.
9. Contracts exchanged.
10. Settlement occurs with full purchase price being paid.

If you need more information on these types of home loan products and how they suit your individual home loan needs, enquire online or call 1300 666 500 to speak with an experienced Workforce Finance consultant.