Buying a home at a time when high interest rates are putting pressure on buyers can be frustrating – but there is a solution.
A deposit bond can be a valuable tool for securing your dream property, even if you don’t have the full cash deposit upfront. It can potentially bridge your financial gap and be a cost-effective alternative to other finance solutions.
As an experienced real estate agent in your neighborhood, I would caution that it’s always essential to understand in detail the financial products you’re considering using.
So, what is a deposit bond?
It’s an insurance policy that substitutes for the cash deposit you’d usually pay when buying a property. It guarantees the seller that you’ll pay the full deposit when the property settles.
To obtain a deposit bond, you approach a deposit bond provider, who will assess your financial situation and the property you wish to purchase. If you’re approved, you’ll pay a fee.
The bond is then issued to the seller, and at settlement you must pay all the funds owed, including the deposit amount. The deposit bond is then released.
This financial tool is helpful if you have cash tied up or you’ve found your dream home but must now sell your existing property and there are insufficient funds to make the deposit. It’s an alternative to bridging finance, which can be expensive.
Below, I’ve listed those who might get the most value from a deposit bond. But let me stress again: I’m not recommending you use them. I am only highlighting their existence so you know you have an alternative to bridging finance.
I hope you find this information helpful. In the meantime, if I can help you with your property needs, please do not hesitate to contact me.
Deposit bonds can be used by the following;
- First-home buyers who may still need to save the full deposit.
- Investors who want to keep their cash working in other investments.
- Upgraders who are buying and selling simultaneously.
- Folks who simply need a short-term solution for their deposit.
NOTE: The information in this article is general in nature and provided as a market overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.