What is a deposit bond and when do I use it?

Deposit bonds substitute for the cash deposit (typically 10% of purchase price) that's normally exchanged at contract signing. The bond is an insurance product, issuer guarantees the seller will receive the deposit at settlement if the buyer defaults. Bond fees: typically 1.2-1.5% of the bond amount.

Common use cases: (1) off-the-plan purchases where you don't want $100K+ tied up for 18-24 months until completion, (2) bridging scenarios where your existing home hasn't sold yet but you need to exchange on the next, (3) short-term cashflow tightness where deposit funds will be available by settlement but not at exchange.

Eligibility: lender pre-approval at the loan amount the buyer will need, plus credit + income evidence to satisfy the bond issuer. Bond approval typically 1-3 business days. Most issuers are general insurers (e.g. QBE, Deposit Power); your conveyancer can recommend.

Sellers + agents sometimes prefer cash deposits because they have certainty. A deposit bond is contingent on the buyer being able to pay at settlement; if the buyer can't, the seller has to claim against the bond issuer (paid out, but with delay). For competitive offers in tight markets, cash beats a bond all else equal.