What is a Deposit Bond?

What is a Deposit bond?

A deposit bond replaces the deposit you are required to pay when the home you are buying is “exchanged” (that is, when you’ve signed the contract without a cooling off period, or your cooling off period has expired).

What it is essentially is an insurance policy that you buy & hand over to the seller with the promise that you will pay them the full purchase price at settlement. As such treat it like actual cash – once you’ve handed it over you are obliged to pay that money & if something goes wrong the issuer will be chasing you to cover the deposit at least.

A bond is useful if you don’t have the actual cash available to pay the deposit at that time – which may be because you’re waiting on a sale, a term deposit to mature, a refinance, or you’re borrowing the full value of this place. Often investors also weigh up the costs for the bond vs the return for leaving their money in an investment when they are buying off the plan.