Example: Using a Deposit Bond to Purchase a $1.5 Million Property

Scenario: You are buying a property priced at $1,500,000. Normally, a 10% deposit of $150,000 is required. Instead of paying cash upfront, you secure a deposit bond.

Step-by-Step Process

1. Application
   • Apply with a deposit bond provider (e.g., Deposit Power, QBE Insurance).
   • Submit proof of purchase capability (bank statements, loan pre-approval, equity evidence).
   • Undergo a financial assessment for off-the-plan or long-term bonds.
2. Issuance

   Upon approval, the provider issues a $150,000 bond to the seller as a cash-deposit guarantee.

3. Cost

   Short-term bond (up to 6 months): 1.2–1.3% of the deposit
   • For $150,000: 1.2% = $1,800, 1.3% = $1,950
   Long-term bond (up to 48–60 months): ~3% per year of the deposit
   • For $150,000: 3% = $4,500 per year

4. Settlement
   • Pay the full $1.5 million (including the deposit) at settlement.
   • The bond expires once payment is complete.
   • If you default, the issuer pays $150,000 to the seller and recovers that amount from you.

Summary

Key Points

• Vendor Acceptance: Confirm the seller or agent accepts deposit bonds before proceeding.
• Financial Obligation: You remain liable for both the deposit and the full purchase price.
• Non-Refundable Fee: Bond fees are generally non-refundable unless returned unused within a set period.
• Consultation: Seek advice from a conveyancer or financial advisor to ensure suitability.

For personalized advice on maximizing your investment through strategic financial planning, feel free to chat to assess your borrowing potential and outline a plan for financial success.