Deposit bonds are a substitute for the cash deposit you need to pay when buying a home.
The deposit bond acts as an insurance policy that guarantees the purchaser will pay the deposit to the vendor.
The purchaser when obtaining the deposit bond will need to pay an upfront premium which is non-refundable. The costs of the deposit bond depends on the property value and the length of time to settlement. A purchaser must remember a deposit bond only replaces the need for a cash deposit, it doesn’t remove their obligation to pay the full deposit and purchase price at settlement.
A purchaser should check with the vendor to make sure they will accept a deposit bond. A vendor should note that a deposit bond cannot be released. This means that if the vendor is looking at purchasing another property and does not have the deposit to pay, they will need to obtain a deposit bond and pay the premium. Furthermore, the vendor should know claiming on a deposit bond involves a similar process to claiming on other insurance policies.
If a deposit bond is claimed against, the insurer will try to recover the payment from the purchaser.
If you require any further information on a deposit bond, please contact our friendly staff from the property department on 02 4721 6200.
Written by Megan Johnson