Deposit bonds: can you buy before your cash is available?

You've found the house, but the deposit money is tied up in the one you're selling. You expect to have it by settlement. You just can't hand it over when you sign.

Before paying for one, check when the sale money will arrive, what's left after the loan payout and selling costs, and what happens if the sale is delayed. The bond won't fill a shortfall in your purchase funds.

A cash deposit is money paid to the deposit holder and credited towards the price. A deposit bond gives the seller a guarantee instead. The issuer's fee doesn't pay off any of the purchase price or increase the share of the home you own outright.

With Deposit Power, the bond isn't a loan: you still pay the full purchase price at settlement. Its indemnity requires you to repay the issuer if it pays a valid claim. Read your chosen issuer's terms before committing, including the expiry date and what you could have to repay.

The bond isn't insurance protecting you if you can't complete the purchase. The issuer may recover money from you after paying a valid claim, and the sale contract may create other liabilities. Ask your solicitor to explain both documents before you commit.

Ask whether the seller will accept the specific issuer, amount and bond terms. Your solicitor should confirm the wording, delivery method and expiry requirements, then record the agreed acceptance in the contract. A conversation about accepting “a deposit bond” leaves too much open.

At auction, check the required deposit and payment method with the agent before you bid. Waiting until you have the winning bid is too late to start that discussion.

They don't have to be the same organisation. ANZ does not offer deposit bonds. If you're arranging an ANZ home loan and a bond from another issuer, check whether that bond works with both the loan and your contract. Our ANZ home loan review covers the mortgage features, not a bond issued by ANZ.

With Deposit Power, a short-term bond runs for up to 6 months and a long-term bond for 7 to 66 months. For a short-term bond, you can show how you'll fund settlement with evidence such as loan approval or savings, or sufficient property equity. A long-term bond needs a different equity assessment. If settlement is 12 months away, don't assume the same application will work as for a 60-day established-home purchase.

For a Deposit Bond Australia application, be ready to explain whether settlement is within 6 months, whether you need a loan and whether your formal approval has only the valuation outstanding. An online mortgage pre-approval isn't automatically enough. Deposit Bond Australia is an authorised agent of QBE Insurance (Australia).

Ask us to check the mortgage and settlement-funding plan before you order a bond. Your solicitor checks seller acceptance and contract wording. The issuer decides whether it will issue the guarantee. Keeping those jobs separate helps avoid paying a fee for a bond that doesn't solve your purchase problem.

One Hunter Galloway client planned to use funds released through a refinance for their next purchase deposit. The refinance was delayed, so the money might not arrive before the deposit deadline.

We raised two options: ask the seller to accept a smaller cash deposit, or investigate a deposit bond while the equity release progressed.

The client later reported that the seller had agreed to accept a bond. Their conveyancer then requested the refinance approval letter to show the bond company where the remaining purchase funds would come from. Our team supplied the requested documents.

This was a bond option being arranged, rather than a confirmed issued-bond result. Seller acceptance was one step; the issuer still had its own assessment to complete.

The practical lesson: check the deposit deadline against the date your funds will actually be available. Even with an accepted and issued bond, you still need the full settlement funds and remain responsible for your contractual obligations.

Expect to explain how you will complete the purchase. Owning another home doesn't automatically mean the issuer will approve a bond. Get the actual quote and conditions, and ask whether anyone else must sign a guarantee or indemnity. They should get advice before signing too.

Ask for the fee and refund rules in writing. Check whether the bond can be extended, what that costs and what happens if settlement moves beyond expiry.

An extension isn't automatic. If a delay develops, contact the issuer and solicitor before expiry and check whether the contract requires a replacement bond.

Then compare what retaining your cash is genuinely worth. It may reduce interest if it stays in an eligible offset account, a linked account whose balance reduces the loan amount charged interest. But don't assume keeping money invested will earn more than the bond costs.

You may be able to negotiate a smaller cash deposit, align the sale and purchase dates, or arrange suitable bridging finance. Each needs its own agreement, approval and risk check.

Our bridging loan guide covers borrowing to complete a purchase, which is a different job from replacing the contract deposit. If you're buying your next home, compare the complete buying-and-selling plan before choosing how to pay the deposit.

The contract deposit and the contribution your lender requires aren't the same thing. A bond doesn't create savings or reduce your required contribution. For home loans for first home buyers, check lender, scheme and issuer requirements separately. Ask the broker and issuer whether the proposed arrangement is acceptable.

Say you're buying for $900,000 with a $90,000 contract deposit.

With the bond, you haven't paid $90,000 towards the home. Your approved loan and own funds must still cover the whole $900,000 purchase price, plus costs. Confusing the 2 versions leaves a very large hole in the settlement budget.

Bond approval isn't home-loan approval either. Your broker still needs to check the property, loan, net sale proceeds and settlement dates. A lower sale price or a late settlement on the old home doesn't automatically become the bond issuer's problem to fund.

Contact the issuer and your solicitor before expiry. Ask whether an extension or replacement is possible, what it costs and whether the seller must agree. Don't assume the original bond automatically covers a delayed settlement.

Before relying on it, confirm all 3 parts: the seller has agreed to the specific bond, the issuer has approved and issued it, and your loan plus own funds cover settlement in full. Bond approval doesn't approve the home loan.

Send the price, proposed deposit terms, settlement date and source of funds to our mortgage brokers in Brisbane. Include net sale proceeds after your loan payout and selling costs. Call Hunter Galloway on 1300 088 065 or request a free assessment.

Our borrowing capacity calculator gives a starting estimate, not bond approval or confirmation that the sale money will arrive in time. Use Moneysmart's home loan repayment calculator to test the ongoing mortgage, and have your solicitor review bond acceptance before committing.