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DEPOSIT BONDS

smart alternative to a cash deposit

QBE
Deposit Bonds are a smart, viable solution when purchasing an investment property

Deposit Bonds are a smart, viable solution when purchasing an investment property, without needing to free up the cash for 10% deposit.

There a multiple reasons why buyers may prefer to use Deposit Bonds instead of the actual deposits for a property or investment:

  • Loan funds for the purchase may only be available at settlement
  • A buyer may also be selling simultaneously and is waiting for the sale funds to arrive
  • Assets or cash may be tied up, or simply not available
  • Savvy investors see Deposit Bonds as an efficient use of capital, rather than having a deposit sit in a trust for 2-3 years, they could use their cash elsewhere and earn higher returns

A Deposit Bond is an insurance policy. The deposit is guaranteed by the insurance company to the vendor (in property cases, this is the developer).

No money actually changes hands under the Deposit Bond. Instead, the purchase funds are paid in full at the time of the settlement. At that time, the terms of the bond are complete, the vendor receives the deposit with the transfer of the purchase funds.

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There a multiple reasons why buyers may prefer to use Deposit Bonds instead of the actual deposits for a property or investmen

HOW DO DEPOSIT BONDS WORK?

HOW DO DEPOSIT BONDS WORK

FAQ's

A Deposit Bond is a smart, viable option for a number of situations or reasons. Most commonly, deposits bonds are used when:

  • The property is off-the-plan. Talk to an APFG property agent to find out which of our projects are accepting Deposit Bonds.
  • The purchaser is also selling, or waiting for funds to come through another source.
  • The purchaser would prefer to keep the cash, where he/she can use it to earn a higher return.
  • The purchaser has equity in homes and properties, but a limited amount of liquid assets.
Deposit Bonds are available to individuals, companies and trusts. They are most suitable for existing property owners and investors who wish to purchase another property to expand their portfolio.
Like any insurance policy or credit loan, the insurance company will determine if the purchaser is qualified for the amount of the policy. In the case of Deposit Bonds, you have to apply and meet financial criteria and must have a certain amount of equity to ensure that there is minimal risk that you will fail or default on the settlement.
This is determined between the purchaser and the insurance company, depending on when the developer needs the payment of the deposit or settlement. At APFG, our deposit bonds are issued through QBE, and the terms can be anywhere from 6 months and up to 5 years.
If the purchase does not go through and the purchaser defaults on the agreement, the developer can claim the amount of the bond (the 10% deposit) from the bond issuer. After that is settled, the insurance company will recover the amount from the purchaser.

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