Deposit Guarantees can be used for:
buying by negotiation or auction
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
What is a deposit guarantee and how are they used
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.
Deposit guarantees are widely accepted and trusted throughout Australia as a means of securing a property purchase.
A Deposit Guarantee can be issued for all or part of the deposit amount required, up to 10% of the purchase price.
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.
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.
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.
Why use a deposit guarantee
Deposit guarantees can be a low cost alternative compared to other options such as overdrafts, bridging finance or breaking a fixed term investment.
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.
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
Long term guarantees are priced on the amount of the guarantee as well as the period of required until settlement.