Deposit Guarantees
Deposit Guarantees can be used for:
or
buying by negotiation or auction
To Buy:
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.
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.
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.
