Are you looking to downsize or buy a new property but worried about coming up with the 10% cash deposit?
Deposit bonds are an important part of the property buying process and have become increasingly popular as interest rates rise. Securing a deposit bond can be the practical solution you need for a more accessible and convenient real estate transaction.
However, how does a deposit bond work, and how can you take advantage of this option?
This article will provide a comprehensive yet straightforward explanation for using a deposit bond. We’ll share how a deposit bond can help you to secure the perfect property for you.
Prefer to watch a video? Our expert Grant talk through in this video, or read on below.
How does a deposit bond work?
A deposit bond’s primary purpose is to offer home buyers flexibility and financial freedom. This alternative approach can be desirable for those who don’t have the cash readily available during the initial stages of purchasing a property.
When a buyer purchases a deposit bond, they use it instead of providing the seller with an immediate cash deposit, which usually requires 10% of the purchase price to secure the property. A deposit bond acts as a substitute allowing the buyer to delay paying the cash deposit until settlement at which point in time, they pay the total purchase price.
The deposit bond provider acts as a guarantee ensuring the seller will receive the agreed cash deposit if the buyer fails to fulfil their obligations.
How to Secure and Use a Deposit Bond
To obtain and utilise a deposit bond, you’ll need to take the following steps.
- Apply through a deposit bond provider, by providing some financial information and details about the property transaction
- The deposit bond provider will assess your eligibility
- If approved, you’ll receive the deposit bond related to the property’s purchase price
- Submit your deposit bond to the seller as a guarantee of your commitment to the purchase that the actual deposit will be paid at the time of settlement
- When settlement day arrives, you simply pay the full purchase price
Types of ENABYL Deposit Bonds
Deposit bonds remain valid for a set period, allowing buyers ample time to arrange the necessary funds for settlement. With ENABYL, you can choose between four distinct types of deposit bonds to meet your needs.
- Short-term deposit Bonds for buying an existing title property with a settlement timeline of less than six months
- Long-term or ‘Off The Plan’ Deposit Bonds for terms six to sixty months, such as properties under construction
- Auction Deposit Bonds for buying properties through auctions
- Downsizer Deposit Bonds, which is tailored for buyers over fifty-five looking to downsize
The Benefits of Using a Deposit Bond for Downsizers
Deposit bonds have become increasingly popular among downsizers looking to invest in a new home in Australia, and for good reason. This innovative product offers many advantages, making the downsizing process smoother and more convenient.
Frees Up Your Cash
Rather than parting with a substantial sum of money upfront, you can use a deposit bond to secure the property without the immediate burden of paying a cash deposit.
Speed and Convenience
Timing is crucial in a competitive real estate market where properties can be sold within days or even hours. You don’t want to miss out on your dream property because you couldn’t arrange a deposit in time. With a deposit bond, you can act fast and increase your chances of securing the property you desire without requiring lengthy paperwork or waiting for funds to clear.
Flexibility and Versatility
For downsizers exploring different options and not wanting to restrict themselves to a specific property type, you can use a deposit bond for various types of property purchases, including auctions, private sales, off-the-plan properties, and land purchases.
Using Deposit Bonds for Property Purchases
While you may understand the concept and purpose of a deposit bond for easing the way for you to purchase a new property, you still may have a few of the following frequently asked questions
How is a deposit bond different from a bank guarantee?
Unlike deposit bonds, bank guarantees require you provide security to the bank, involve more documentation, and take much longer for approval. For downsizers, the advantages of deposit bonds far outweigh a bank guarantee.
Does a deposit bond guarantee the property purchase?
A deposit bond only guarantees the deposit will be paid. It does not guarantee the property purchase.
How much do deposit bonds cost?
Fees for deposit bonds depend on several factors, including the deposit amount, the term you choose for the deposit bond, and your financial situation.
ENAYBL Deposit Solutions provides a handy fee calculator to help you estimate your potential cost accurately.
Why Deposit Bonds Are a Practical Solution for Property Investment
Deposit bonds are an innovative tool that offers you, as a property buyer, the flexibility and peace of mind to secure your dream home or investment without the immediate pressure of a cash deposit. By understanding how deposit bonds work and their benefits, you can confidently navigate the property market, overcoming financial barriers while protecting your interests throughout the transaction process.
Enquire About Deposit Bonds with ENAYBL Deposit Solutions
Take one step closer to the home of your dreams with a deposit bond from ENAYBL Deposit Solutions. We help downsizers and home buyers like you use deposit bonds to solve your property investment needs. Learn about how a deposit bond can make your dream home a reality. Contact ENAYBL Deposit Solutions today!
