A Deposit Bond (also known as a deposit guarantee) is an alternative to paying a cash deposit when purchasing a property. 

Instead of paying the deposit upfront when contracts are exchanged, a deposit bond allows the buyer to provide the seller with a financial guarantee for the deposit amount. This guarantee is issued by an insurer and confirms that the deposit will be paid if the buyer fails to complete the purchase. 

When you use a Deposit Bond: 

• You sign the contract without paying a cash deposit 

• The seller receives a bond certificate in place of cash 

• The bond remains in place until settlement 

• At settlement, the full purchase price (including the deposit amount) is paid as normal 

If the purchase completes successfully, the bond simply expires and no money is paid out under the bond. 

If the buyer defaults and the seller is legally entitled to the deposit, the bond provider pays the seller and then seeks recovery from the buyer. 

No. 

A Deposit Bond is not a loan and does not provide you with cash. 

It is a guarantee only, meaning: 

• You pay a one-off fee

• No interest is charged 

• No repayments are required unless the bond is called upon 

Deposit Bonds are commonly used when: 

• Funds are tied up in another property awaiting settlement 

• Money is invested and not easily accessible 

• The buyer wants to preserve cash flow 

• Purchasing off-the-plan with a long settlement period 

• A buyer wants to secure a property quickly without liquidating assets 

Most buyers can apply, subject to assessment. The bond issuer will usually consider: 

• Your financial position 

• Your ability to complete the purchase at settlement 

• The property value and purchase price 

• The length of time until settlement 

Deposit bonds are typically issued for up to 10% of the purchase price. 

A Deposit Bond involves a single upfront fee, calculated based on: 

• The deposit amount 

• The length of time the bond is required 

The fee is generally significantly less than the cost of tying up cash or using short-term finance. 

Most sellers will accept a Deposit Bond, however acceptance is not mandatory. 

It’s important to: 

• Confirm acceptance with the selling agent before exchange 

• Ensure the contract allows for a deposit bond instead of cash 

• You must still have the funds available at settlement 

• If you default, the bond issuer will recover the deposit amount from you 

• Terms and acceptance can vary between sellers and providers