As Australia’s longest standing issuing agent of short and long term deposit bonds, the team at Deposit Bond Australia have an unrivalled depth of experience in the development and management of both residential and commercial deposit bond programmes. DBA have developed the broadest deposit bond policy and service range offered by any issuer in the residential and commercial property finance sectors. As authorised agents of QBE Insurance (Australia) Limited, DBA currently offers the only deposit bonds accepted nationwide for all terms from 6 weeks to 66 months.
Whether you are an investor or buying a property to live in, deposit bonds are the smart way to secure your purchase. But what exactly is a deposit bond, and what are the benefits of using one? This month, the team at DBA presents the essential guide to deposit bonds:
What is a deposit bond?
A deposit bond is a form of financial guarantee accepted as a legal substitute for a cash deposit when committing to buy property. This defers the need to use your own money up front, and is the most time and cost effective way of securing the commitment to buy a property. The value of a deposit bond can be for any amount up to 10% of the agreed purchase price of the property, and at settlement you will be required to pay the full purchase price and any associated costs.
Why use a deposit bond rather than your own funds?
There are several reasons why you may not be able to, or want to, use your own funds to pay your deposit. You may not have immediate access to the cost of your deposit, or the property you intend to purchase may be under construction with a longer than usual settlement. Your funds may also be tied up as equity in other assets or longer term investments such as shares. Using a deposit bond negates the need to have ready access to the full deposit you are required to pay upon the signing of your contract of sale.
How much do deposit bonds cost?
When your deposit bond is issued, you pay a one-off, upfront fee with no ongoing fees or interest charges. The deposit bond cost will depend on the value of the property and the length of time until settlement. Deposit bonds are also unsecured, which means that assets, savings or lines of credit can be kept intact. To find out what your deposit bond cost, head to our deposit bond fee calculator for an immediate quote. Please note that these calculators are only for individuals purchasing residential property. If you are a corporate applicant or buying commercial property, please call our friendly staff for a quote today on 1800 266 388.
Who can apply for a deposit bond?
DBA provides residential deposit bonds and commercial deposit bonds to individual or corporate purchasers, owner occupiers, investors, first home buyers, retirees, company trusts, SMSF applicants and the self-employed. You are required to be an Australian citizen or hold permanent Australian residency status in order to be eligible to apply for a deposit bond. Any deposit bond applicant must prove that they are able to pay 105% of the purchase price on the contract settlement date to be approved by DBA. The assessment of your financial position is made at the date of application, and is not based on future earnings, savings or asset acquisition. For more information, please visit our FAQ page.
What are the benefits of having a deposit bond?
There are multiple benefits to having a deposit bond when purchasing property. One benefit is the unsecured nature of DBA/QBE deposit bonds, meaning that you are not required to provide any form of security. This allows you to retain full flexibility of your assets including cash savings, fixed term deposits and share portfolios. Another benefit is the one-time fee associated with deposit bonds. With no ongoing charges, choosing to use a deposit bond is a particularly cost effective method to purchase property, and compares favourably with alternate deposit options. At DBA, we also do not require the property to be sold at the time of application, meaning that for owner occupiers there is no need to sell your current home and relocate before your new home is ready to be occupied. This saves the anguish and cost of two moves, plus the potential need to pay interim rental.
Why choose Deposit Bond Australia?
DBA has been an authorised deposit bond issuer since March 1998, and currently approves deposit bonds with the highly regarded QBE Insurance as our underwriter. We have built a reputation for a consistently reliable and efficient service, assessing applications and approving and issuing deposit bonds within 4 – 48 hours depending on the complexity of your situation. Our deposit bonds are more efficient than a bank guarantee, with no mortgage documentation or loan approval required. Also, by using a DBA issued deposit bond there is no need for you to draw on existing lines of credit or sell other investments, making your money work harder.
Ready to apply? We offer a convenient online deposit bond application service here.
For more information about our range of products and services, please refer to our Information Brochures located under Downloads.
The friendly staff at Deposit Bond Australia are available during normal business hours (EST) to talk to you about your needs. If you have any questions, please Contact Us or use our Freecall number 1800 266 388.