NFC National Finance Corporation can arrange deposit bonds. Deposit bonds are a cash replacement in the form of a bond that gives you the convenience of making an upfront deposit on the purchase of a property. It is an alternative to all or part of the 10% down-payment/deposit you are normally required to produce upfront when you purchase a property. Rather than handing over the full 10% in cash immediately, you hand over a deposit bond which you arrange with leading mortgage brokers such as NFC National Finance Corporation. The cost for a deposit bond starts at approximately 1.2% of the bond amount for short term bonds of up to 6 months.
Deposit bonds are often issued in two forms which are short term bonds for periods up to and 6 months and long term bonds for periods of 12 to 48 months and sometimes longer depending on what the settlement terms are for your property. Be sure to check what we call the "Sunset Clause" when arranging a quote for a deposit bond. The builder or developer may suggest completion at a certain time but the contract to purchase has a clear "sunset clause" which is the date the builder/developer must complete the property. At NFC we have seen expected completion dates and sunset clause dates differ by a couple of years.
Short term bonds are ideal for property purchases or for auctions while long term bonds are suited to ‘off the plan’ or properties which are to be completed in the future. Using a deposit bond is easier and less expensive than using your cash savings or your bank guarantee and can be used as a means of security to a vendor that a deposit will be paid on settlement.
Why use Deposit Bonds?
By using a deposit bond you can -
- Secure property with minimal outlay and bridge the time gap between the purchase date and settlement
- Purchase a property at a moment's notice
- Avoid increasing lines of credit
- Let your money continue to work for you elsewhere until the last possible moment
- Avoid applying for expensive bridging finance
- Purchasing property at auction without needing large cash reserves
Who are the Major Players (as at October 2013) and who does NFC use for deposit bonds?
Deposit Power are one of Australia's largest suppliers of deposit bonds for up to 6 months. For deposit bonds greater than 6 months NFC use Deposit Power and QBE issued bonds. Long term bonds have strict credit criteria, ask your bank or mortgage broker what credit policy requires before you leave it to chance. Once you have applied for a deposit bond and it is declined it may be difficult to have it re-assessed. Talk to the experts NFC National Finance Corporation before you apply and let us take the hassle out of making an application for a deposit bond.
What do I need to know?
When applying for a deposit bond you should keep in mind the following -
- Deposit bonds are invariably unsecured, and once issued, you will not be able to refund them
- They are just another form of credit. When you settle the full amount of your property you will have to produce the balance of the purchase cost and the deposit that was covered by the bond
- If you default when the bond expires, the bond's underwriter will pursue you for the deposit and the cost of your investment
Who can apply for a Deposit Bond?
Any purchaser of a property can apply for a bond including:-
- Existing property owners
- Investors who want to grow their portfolio
- First time home buyers
- Most commercial property purchasers
If you’re not sure if you fit these categories, call NFC National Finance Corporation today and we will pre-qualify you for a deposit bond.
Deposit Bonds V Bank Guarantees
Bank Guarantees are generally secured by residential property or cash deposits whereas deposit bonds are not secured. NFC National Finance Corporation can also arrange bank guarantees, ask us today. Bank guarantees are normally a business banking product and the average mortgage broker/finance broker may not have the accreditations to assist. At NFC we can assist with any bank guarantee requirement.
Deposit Bond Providers - Who do I Choose?
Are all bond providers treated equally? The answer is sometimes no!
Long Term Deposit Bonds have to be acceptable to the developers financier which poses new challenges to those not experienced in this area. There have been cases where purchasers have obtained a deposit bond after paying the fee to discover the deposit bond will not be accepted by the developers financiers.
NFC are specialists in deposit bonds and can guide you through the process and aviod these potential problems.
How Can I Apply for a Deposit Bond? Simply contact NFC for an application form today.