What is a Deposit Bond
Deposit bonds in Australia are financial instruments often used in the real estate market as an alternative to paying a cash deposit when purchasing property. It is an insurance policy that normally acts as a guarantee to the vendor that the purchaser will pay the deposit/amount of the Deposit Bond.
How do Deposit Bonds Work
1. Purpose: A deposit bond acts as a guarantee to the seller that the buyer will pay the full deposit amount at settlement. It is a digital certificate that will guarantee the deposit. This can be particularly useful for buyers who want to purchase a property but don't have immediate access to cash for the deposit.
2. Providers: Deposit bonds are typically provided by deposit bond providers backed by an Insurer. They assess the buyer's financial situation and issue a bond that guarantees the deposit amount.
3. Duration: The bond covers the period from when the contract is signed until the settlement date. Short-term bonds are common for standard property purchases, but longer-term bonds can be used for off-the-plan purchases where the settlement date is further in the future.
4. Cost: There is a fee for obtaining a deposit bond, which varies based on the bond's duration and the amount of the deposit. This fee is usually a percentage of the deposit amount.
5. Benefits: For buyers, deposit bonds provide flexibility, allowing them to secure a property without liquidating assets or taking out a loan for the deposit. Sellers benefit from the assurance that the buyer is committed and financially vetted by the bond provider.
6. Considerations: While deposit bonds are widely accepted, not all sellers or real estate agents may accept them, so it's important for buyers to confirm this beforehand. Additionally, buyers should assess the cost-effectiveness of using a deposit bond compared to other financing options.
7. Application Process: To obtain a deposit bond, follow the process as per your accreditation with the bond provider through their website.
Who are the Deposit Bond providers on Panel
On Oxcel panel we have two providers of Deposit Bonds.
- Deposit Power https://oxcel.com.au/
- Deposit Bond Australia First Home Buyers Deposit Bonds | Deposit Bond Australia
Process within Infynity if Deposit Bond is part of a Loan Application
It's essential for brokers considering using a deposit bond for their client’s requirements to carefully review the terms and conditions and discuss with the clients, to ensure it fits their financial situation and the requirements of the property transaction.
Deposit Bonds are not a lending product, they are an Insurance product therefore if you are completing a deposit bond as part of the mortgage finance application, we recommend that you disclose the deposit bond in the SOCA under the “other recommended products” in Infynity as highlighted below. Ensure you record detailed notes about the requirement of the deposit bond within the SOCA.
- Use the “add” button and disclose the relevant information for the Deposit Bond
- Select "other" and enter in the relevant details as required
Process within Infynity for Deposit Bond ONLY
If you are not doing a mortgage loan and only assisting your client with a deposit bond, then a SOCA is not required.
• Set up a customer profile in Infynity as normal.
• Email the customer outlining the requirement of the deposit bond, timelines of the bond and associated fees.
• Keep good, detailed notes of your conversations with the client.
• Disclose your commission for the recommended product.
• Seek consent to submit an application for the Deposit Bond.
• Save the customers consent email in the documents tab within the client profile.
If you have any more specific questions about the Deposit Bond process within Infynity, please email [email protected] for further guidance.
Disclaimer: This information is current as at the time of each QRG publication. It is a general information guide only.