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Welcome To
ENAYBL Deposit Solutions
A Deposit Bond is a substitute for the cash deposit when purchasing a property. A buyer is required to pay a deposit to secure the property pending completion. This is usually 10% of the purchase price. Instead of the buyer paying a 10% cash deposit, a Deposit Bond is used as an alternative.
Deposit Bonds
A Deposit Bond is similar to a bank guarantee except it is issued by an insurance company.
Utilising a Deposit Bond does not remove the requirement for the buyer to pay that 10% of the property price. Rather, it simply delays its payment until completion of the property purchase.
By way of example, if a buyer wanted to secure a property selling for $800,000, they could pay a cash deposit of $80,000. When it comes time to complete on the property sale, they need to come up with the balance of the funds being $720,000.
Alternatively, the buyer can purchase a Deposit Bond, and use this Deposit Bond, in place of the usual cash deposit, to commit to the sale of the property. They do this by sending the Deposit Bond to the seller, or the seller’s legal representative, who retains the Deposit Bond in lieu of the deposit, pending completion of the sale. As the buyer has not paid a cash deposit, when they complete the property purchase, they have to pay the full purchase price – $800,000 in this instance.
Why a Deposit Bond
People choose a Deposit Bond for the following reasons:
• It is simple and quick to organise
• It doesn’t tie up assets
• It is cost effective
Most people do not have lots of money sitting in a bank account readily available to pay a cash deposit on a property purchase. Instead, they may have their money locked up in the equity in their home or invested in a term deposit or shares or in their superannuation fund earning them a return.
The cost of a short term deposit bond for a period of up to 6 months is less than 1.5%.
