Deposit Guarantees
Deposit Guarantees can be used for:
or
buying by negotiation or auction
To Buy:
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an existing property off the plan or a land (unregistered or new premises invest in commercial invest or buy
house & land package vacant) for your business property via SMSF
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What is a deposit guarantee and how are they used
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A deposit guarantee (or deposit bond) acts as a substitute for the cash deposit required by the purchaser between signing a contract of sale and settlement on a property. It acts as a guarantee of the deposit payment. At settlement the purchaser simply pays the full purchase price including the deposit.
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Deposit guarantees are widely accepted and trusted throughout Australia as a means of securing a property purchase.
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A Deposit Guarantee can be issued for all or part of the deposit amount required, up to 10% of the purchase price.
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We understand that depending on negotiations between purchaser and vendor deposit amounts can vary anywhere between 1% up to 10% of the property purchase price. We also know that at other times a purchaser may want to split their deposit between cash and a deposit guarantee.
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Deposit guarantees can be issued to purchase most types of properties with settlement terms to match the needs of the purchaser. Most properties (registered properties) settle within 6 months or sooner but there are many other situations that require a longer settlement term, up to 48 months; for unregistered properties, vacant land, properties-under-construction and off-the-plan purchases.
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There are two types of deposit bond, short term where settlement is to occur within 6 months and long term where settlement can take between 6 and 48 months.
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Why use a deposit guarantee
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Deposit guarantees can be a low cost alternative compared to other options such as overdrafts, bridging finance or breaking a fixed term investment.
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Deposit guarantees are very useful if you have cash tied up in other investments such as shares or a term deposit or are waiting on the settlement of an existing property.
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The process for purchasers differs slightly depending on whether you're intending to buy at auction or make an offer on a property; private treaty.
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How much does it cost?
There is usually a minimum fee of $220 but the normal fee is approximately 1.3% of the guaranteed amount. E.g. $400,000 purchase price means a 10%deposit of $40,000 x 1.3% = $520.00
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Long term guarantees are priced on the amount of the guarantee as well as the period of required until settlement.
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