What is a deposit bond? Does that mean I don't have to have a deposit?!

One of the most frequently asked questions about deposits - if I use a bond, does that mean I don't have to have a deposit at all?

The answer is, it means you don't have to have a deposit now, (to meet your contract terms) but you do have to have it by the time you settle (own, purchase, get the keys) on the property - and the deposit is likely coming from equity or a guarantee rather than cash savings.

A deposit bond is like a promise, or and "I owe you" to pay the deposit at settlement.

So who uses a deposit bond and why? Here are some examples:

  • First home buyers using an equity guarantee where they are borrowing most of the purchase price (in effect with the guarantee they don't "have to have" a deposit - who says you have to have 20%, boulder-dash!)

  • Investors who are using equity in their home to fund their investment purchase.