Understanding Deposit Bonds

WHAT IS A DEPOSIT BOND?

Deposit bonds: simple guide

Buying on the Beaches but don’t have a full 10% cash deposit handy? A deposit bond can bridge the gap.

What it is (in plain English):
A deposit bond is an IOU for the deposit—usually up to 10% of the purchase price. It lets you exchange contracts now and pay the actual cash at settlement when your loan or funds become available.

When it helps:

• You’re borrowing 100% of the price and your loan funds only arrive at settlement.

• Your cash is tied up (property rich, cash poor) or sitting in an offset and you’d prefer to keep it working.

• You’re buying and selling at the same time and funds are moving.

• You simply don’t have a convenient 10% in cash right now but you’re otherwise finance-ready.

How it works:

1. You apply through a provider (quick assessment of your finance position and purchase details).

2. They issue a bond for the agreed deposit amount (often up to 10%).

3. At exchange, you hand over the bond certificate instead of cash.

4. At settlement, your lender or funds pay the full purchase price (including the deposit amount).

Quick FAQs

Is a deposit bond the same as cash?
For the seller, it’s accepted as security for the deposit. For you, it isn’t money changing hands—no cash moves until settlement.

Do all vendors accept deposit bonds?
Most do, but some contracts specify “cash only”. I check this before you make an offer so there are no surprises.

How much does it cost?
There’s typically a one-off fee based on the bond amount and the length of time to settlement. No interest is charged because no money is lent out.

Off-the-plan—can I use one?
Often yes, especially with longer settlements. The bond can be issued for the required term (e.g., 18–24 months). I confirm the developer’s policy upfront.

Will it affect my loan approval?
Usually not. It’s not additional debt. But I always coordinate with your broker/lender so everything lines up.

What if settlement doesn’t happen?
If you default, the vendor can claim on the bond up to the deposit amount (just as they could keep a cash deposit). Same contract risk—different form of security.

At-a-glance checklist (are you a fit?)

• You’re finance-ready (or close), but prefer not to part with 10% cash right now.

• Contract allows deposit bonds, or we can negotiate acceptance.

• Settlement timing is clear (short or long, including off-the-plan).

• You’re comfortable paying a one-off fee for flexibility and cashflow.

How I help (so it’s smooth)

• Check contract early for deposit bond acceptance and wording.

• Coordinate with your broker and the bond provider to avoid delays.

• Negotiate with the selling agent/vendor so your offer stays competitive.

• Keep your cash where it works (often your offset) until settlement.

Takeaway:
A deposit bond can make buying on the Northern Beaches simpler and less stressful when cashflow is tight or timing’s tricky. Used correctly, it keeps you in the game without rushing your funds.

Next step:
If you’re considering a deposit bond for a property purchase, send me your timeline and budget. I’ll confirm if it’s suitable for your specific property and line up the contract, lender and provider so you can move with confidence.