ClickCeaseDeposit Bond: A More Efficient Use of Your Cash Deposit

DEPOSIT BOND: A MORE EFFICIENT USE OF YOUR CASH DEPOSIT

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When purchasing a property, it is very common for the buyers to not have the 10% cash deposit, or choose to not pay it. In these instances, Deposit Bonds are a viable substitute for the deposit, widely accepted by developers to guarantee the deposit will be paid at the time of settlement.

Deposit Bonds are most often used when

  • Property buyers are selling simultaneously
  • There is a limited amount of liquid cash available at the time of the purchase
  • Financing funds will only be available at the time of settlement
  • The purchaser prefers the amount of the deposit to be better used elsewhere, in accounts that earn higher rates of return.

Who Accepts Deposit Bonds?
Deposit bonds are legal documents, widely accepted across Australia. No money is actually exchanged when using Deposit Bonds, but property developers are happy to accept the bonds as the guarantee for the purchase. Should the purchase fall through before the time of settlement, the developer can claim the amount of the deposit from the insurer, which in our case our bonds are through our insurance partner, QBE.

Deposit Bonds are favorable options for buying off-the-plan, when purchases are made before the property is complete, and build or completion could take years. Talk to an APFG manager about our off-the-plan projects, whose developers gladly accept Deposit Bonds.

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Benefits of using Deposit Bonds
There are a number of benefits to using Deposit Bonds, rather than paying the deposit to developers.

  • Purchasers can avoid costly time delays of freeing up cash or bridging finance
  • Purchasers’ savings remain intact in an account that is earning a higher rate of return
  • Deposit Bonds are available for short and long terms
  • Deposit bonds are widely accepted and can even be used at property auctions
  • The period between deposit and settlement can often take 2-3 years, and many investors prefer to keep or use their cash elsewhere.

“Deposit bonds are an efficient use of money,” says Matt Sully, CEO of APFG. “When you pay a deposit, the developer will keep it in a trust. Why tie up that $100,000 for 2-3 years, when you can secure a $1,000,000 property for $15,000?”

Talk to an APFG property manager today about our selection of cash flow positive properties and projects with developers who accept our QBE deposit bonds.

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