10 Things You Need to Know About Deposit Bonds

Are you looking at buying a property but worried about having the cash handy for a deposit? You could consider a deposit bond.

A deposit bond is a financial agreement that can be used in place of a cash deposit when purchasing a property, guaranteeing to the seller that the buyer will pay the full deposit at a later date.

Deposit bonds are used instead of cash to pay a deposit on a property. If you decide to use a deposit bond, you will pay the purchase price, plus the deposit and stamp duty at settlement.

Here are 10 things you need to know about deposit bonds:

1. Vendor Approval Is Essential

Before lodging your application, it’s crucial that you seek approval from the vendor/real estate agent to use a deposit bond to purchase the property, instead of a cash deposit.

 

2. Eligibility Requirements Must Be Met

To be eligible for a deposit bond:

  • You must have a formal finance approval; or
  • You must have at least a pre-approval that’s subject to valuation only; or
  • If you’re selling a property and funds from the proceeds of the sale are enough to purchase your new property outright, then you are eligible.

If none of the above applies to you, please talk to one of our specialist mortgage brokers.

 

3. The Cost Of Deposit Bonds Vary

The cost of a deposit bond depends on the value of the property and the length of time to settlement.

If you were to purchase a home for $500,000 and need a 10% deposit of $50,000. It would cost you around $600 for a deposit bond. If you’d like a rough estimate, contact our specialist mortgage brokers.

 

4. Deposit Bonds and Bank Guarantees Are Different

A deposit bond and a bank guarantee are similar in that they provide a guarantee to the vendor that the purchaser will pay the deposit at settlement. However, there are some key differences that you should consider before making a decision.

Security – Deposit bonds are unsecured, and bank guarantees are secured.

Although deposit bonds require an eligibility assessment to ensure you have the financial capacity to settle on your purchase, they are unsecured. Whereas bank guarantees are secured and require real estate or cash security to release.

Cost – Deposit bonds have a one-off fee, but bank guarantees have higher set up and ongoing costs.

Time – Deposit bonds are usually faster to obtain than a bank guarantee, as they require less paperwork and have a simple application process.

 

5. Time Needed For A Deposit Bond When You Have An Off The Plan Purchase

Most of time, when you buy an off the plan purchase a deposit bond is issued up to the ‘sunset clause’ date. A sunset clause date is found in your contract of sale and allows the vendor or purchaser to rescind the contract if the title of the property has not been created by a specific date.

 

6. First Home Buyers Are Eligible

As a First Home Buyer, you can obtain a deposit bond if you:

  • Already have formal approval for your finance through a family guarantor loan, and
  • Your property settles within six months.

If settlement is more than six months or you don’t have finance approval, your guarantor will need to apply with you for your deposit bond. You or your guarantor will need to have a property with the equity to release a deposit bond. This is to ensure the guarantor can pay back the deposit bond amount in the unlikely event of a claim on your bond.

 

7. No Repayments

If you use a deposit bond, you never actually pay back the deposit unless there is a claim. Its purpose is to provide reassurance to the vendor that you have sufficient funds to complete the purchase at settlement. Therefore, at settlement, you will pay the purchase price, plus the deposit and stamp duty.

The only cost involved is the deposit bond fee, which is provided to the lender up front.

 

8. No Interest Payments

No interest payments are required, besides the one-off deposit bond fee.

 

9. Deposit Bonds Can Be Issued Within 4-48 Hours

Once the lender has received your signed application with the bond fee payment, your deposit bond can be approved and issued within 4 to 48 hours. Once approved, the bond deposit is released immediately. The Hrkac Group typically have your deposit bond ready in less than one business hour!

 

10. The Best Way To Obtain A Deposit Bond Is Through A Mortgage Broker

The Hrkac Group make it easy to apply for a deposit bond. Contact our team and we will work with your deposit bond provider on your behalf, so you don’t need to add another thing to your list.

The supporting documents you need will depend on your application type, so we’ll tell you exactly what you need to provide. Then, when the application is ready, we’ll send it to you for electronic signing. It’s as easy as that!

If you have any questions about the topics discussed in this blog, feel free to contact our specialist mortgage brokers, who will provide a personalised and custom service based on your individual circumstances.

 

 

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As a result of everything that has happened this year, we are seeing the lowest interest rates on offer from the major banks in a long time. With rates dropping below 2.5%, now is the best time to get one step ahead on one of your biggest debts.

Whether you’re looking at purchasing a new property, or already have a home loan to pay off, these low rates are going to be in your favour.

If you already have a home loan, the temptation to drop your repayments is there, now that your loan is accruing less interest however, we have some top tips on how to use this drop in interest rates to your advantage and come out the other side a winner:

 

Don’t decrease your repayments.

If you can afford to, leave your repayments at their current rate (or even increase them!) so that you are effectively overpaying on your loan. By simply putting away an extra $50 on top of your minimum repayments you could save yourself over $14,000 in interest over the life of your loan (based on a $300,000 loan with 5% interest over 25 years) – more money in your pocket!

 

Choose a fixed loan.

Fixing all or part of your home loan is the best way to take advantage of the low rates and protect yourself against sudden rate increases over the next few years. This gives you some peace of mind that you won’t be surprised by any sudden or dramatic rate increases and you’ll know exactly how much you need to put away each month to make the repayments.

 

Open an offset account.

Some loans come with the ability to offset your savings account against your home loan. This in turn reduces the interest you pay on your home loan, by offsetting the interest your savings accrues. This is another way to add a buffer to the amount of interest you pay on your home loan.

At The Hrkac Group, our Finance team can help you find the right loan, set up an interest rate to suit your needs. Give us a call today on 5224 2366 with your questions.

First Home Loan Deposit Scheme

Purchasing your first home is a mix of making a daunting life decision and overwhelming excitement all at once. Even though you’re locking yourself in for a significant debt for the first time and you might be doubting your saving ability, there are many support systems in place to make the process of buying your first home easier.
The First Home Loan Deposit Scheme is a new initiative by the Australian Government and the National Housing Finances and Investment Corporation (NHIFC), where the Government will guarantee support for a percentage of your deposit.

Generally, you need to save a minimum of 20% of a home’s value as a deposit to avoid paying extra insurance and bank fees on your first home loan. Referred to as Lenders Mortgage Insurance, you’re basically paying the bank a fee to cover you for the amount you fall short on your deposit. With the new Deposit Scheme, the minimum deposit you’re required to pay, to avoid extra fees, is just 5%. If you can put forward 5% of your new home’s value, the Government and NHIFC will provide a guarantee to your bank for the remaining 15% (maximum).

This is not a cash payment or a deposit for your house, and there are no costs involved. What you get is support in the form of a guarantee from the Government to your bank, that you will be responsible for meeting all costs and repayments over the life of the loan. What’s even better, is this Scheme can be used in conjunction with other initiatives like the First Homeowners Grant (which exempts you from paying stamp duty on your first home).
As expected, there are rules for eligibility, which are outlined in great detail here. Some of them are:

  • It must be your first home purchase
  • You must be 18 years of age and an Australian Citizen
  • You must be either single or in a de facto/married relationship
  • You must earn under a certain amount ($125,000 for singles / combined $200,000 for couples)
  • It must be your primary residence (investment properties are not covered)
  • The property price must be under the price cap for its location (more information here).
  • It must be a principle and interest loan

If you can tick off all of these criteria, then you are eligible to apply for a place in the scheme but be quick because there are limited places available in this financial year. The Deposit Scheme is only offered in partnership with certain lenders though, so it’s best to talk to your lending specialist to reserve your position in the Scheme before they run out. There will be more places released after July 2020.

Get in touch with Paul Duncan, Geelong’s Lending Specialist to talk about securing your place in the First Home Loan Deposit Scheme today. Contact us to make an appointment, or phone 03 5224 2366.

Information is intended to be of a general nature only and any advice has been prepared without taking into account any person’s particular objectives, financial situation or needs</em

The idea of purchasing a property is daunting enough whether it is your first home or another addition to your investment portfolio. Add in the idea of the mountain of paperwork that goes along with obtaining a home loan and it may seem impossible!

The paperwork lenders require can be significant, and it’s important to provide the correct documentation and completed checklists. Sending your home loan application with missing or incorrect documents can result in your loan application going back and forth without result or even derail the application altogether.

After evaluating the risk involved with repaying a loan, lenders will decide whether or not your application will move forward. While requirements may vary from lender to lender, there are some key criteria commonly used to assess the risk of a client.  

Income

The first and foremost area your lender will look into is how much you earn, as well as how stable your earnings are. They want to make sure you can consistently make repayments to your loan and are maintaining continuous employment. Bank statements, payslips, group certificates, and tax returns are among the documents required to give evidence of your income.

 

Savings

Although the overall number in your bank account is taken into consideration, lenders look at whether you are capable of saving over the long term. A bank account statement showing regular deposits is an example of a required document. In the lead-up to applying for a home loan, think twice about buying your daily coffee or eating out multiple times a week. Instead, deposit this money into your savings account. It is not uncommon for applications to be rejected if a savings history is deemed not to be genuine, for example, if the majority of savings have been given as a gift.

 

Other income/assets

To better determine your financial situation, lenders want to see proof of your assets and liabilities, including savings, shareholdings, and motor vehicles or an additional form of income. The Hrkac Group team can advise you on the specific paperwork requirements, as each lender can differ.

 

Credit

In order to determine that you have been able to make any previous credit card repayments and bill payments, lenders will look at copies of credit card and personal loan statements. Keep in mind that it’s not only just your credit card, home loan, or personal loan repayments they’ll look at, but also any mobile phone and utility bills.

Buying a home is a big step in everyone’s lives and there are certainly many hoops to jump through along the way. The team of Mortgage Brokers at The Hrkac Group aims to make the process of gathering all the necessary paperwork and applying for a home loan as simple and stress-free as possible.

Call us today to arrange an appointment.

Today’s Home Loan market is a complex proposition for potential borrowers, from First Home Buyers through to experienced property investors. Engaging a Mortgage Broker to assist you can make all the difference in being able to find a suitable loan from a maze of lenders, with complex lending rules and regulations currently in place. A mortgage broker can do all of the leg work for you, including checking your borrowing capacity and ensuring you meet the lending criteria, of dozens of lenders, and you choose who you want to deal with.

It is important to note that a Mortgage Broker is required to work in your best interests by law, and consumers have legal protection if a Broker doesn’t do so. Hrkac Group Mortgage Broker’s don’t charge any fees to our clients. If we do our job properly, and locate a suitable loan for our clients, the Lenders will pay a commission to us. The commission isn’t added to your loan amount or interest rate, so it is a completely free, ethical and professional service we provide.

Why use HRKAC’s Mortgage Brokers:

1) We’re thorough

We discuss and analyse your existing situation, your home loan needs and requirements, and obtain all necessary information pertaining to your home loan application.

2) We make it simple

We explain the types of home loans available to you from a range of banks and specialist finance companies. Such as:

  • Home Loans
  • Investment Home Loans
  • Vehicle & Equipment Loans
  • Small Business Loan
  • Refinances
  • Debt Consolidations

3) Specialised & personalised service

Based on the information provided by you, and utilising specialist home loan software, we match your home loan requirements to a selection of home loan products offered by our panel of lenders.

4) Overview of costs

We provide an overview of your ‘Purchase Budget’ incorporating the relevant costs associated with your home loan application in writing.

5) In-Depth view of products

We provide an in-depth overview of the home loan product or products you select, in writing.

6) We do the tricky parts

We complete and package your home loan application and deliver it to the lender’s assessment team on your behalf.

7) We dot the i’s and cross the t’s

We act as an intermediary between you and the lender, negotiating the terms and conditions of your loan. We will also answer any questions the lender’s assessment team may have, on your behalf.

8) Communicate with all parties

We liaise with your solicitor, real estate agent and accountant, and any other related parties to ensure a smooth and timely settlement.

9) Going the extra step

We assist with any future home loan requirements, whether you wish to check, change, or top-up your loan, or renegotiate your current home loan interest rate with your existing lender.

10) Keeping you updated

We act as a valuable information service beyond the settlement of your loan by providing you with relevant information on the home loan market, updates on products, and special offers that may be of interest to you.

So for borrowers, what are our alternatives?

On Wednesday evening, Westpac announced their intention to increase the interest rate on their owner-occupier and investor loans by 0.2% and the likelihood of the other major lenders following suit is quite high.

With this decision affecting those with personal loan, investment loans and business loans alike, it begs the questions; what is our alternative to the major lenders?

Well, the Finance division at the Hrkac Group Geelong can help! We have been provided with some very attractive alternatives to the major lenders with application and annuals fees being waived, interest rates reduced to record lows and cash rebates for refinancing on offer, there are thousands of dollars to be saved every year!

There has never been a better time to come in and see our Loan specialists at the Hrkac Group. We will review your current loan and help you understand the best possible options available to you, all free of charge!

Contact us today to find out how to make the most of these great offers and beat the 0.2% rise!

When was the last time you checked your Home Loans and Residential Investment Finance loan rates? With rates at their lowest levels in recent history, now may be the time to fix your Interest rate on your loan.

Did you realise a one per cent increase in your Interest rate, on a $300,000 loan, equates to an increase in your monthly interest repayments and therefore the bank taking an extra $250 a month from your pay. Can you afford to be exposed to this risk?

If not, Geelong’s Finance Specialists at The Hrkac Group can assist you with reviewing your fixed rate options.

This could include switching to the National Australia Bank (NAB) for following fixed rate options, or any of our other 20+ lenders offering similar rates.

NAB announced on Monday 3rd March 2014 that the bank had cut two-year fixed rates from 4.89 per cent to 4.84 per cent, three-year fixed rates from 5.13 per cent to 5.06 per cent and five year fixed rates from 5.79 to 5.69 per cent.

According to NAB, the two-year fixed rate is now the lowest it has been in more than 20 years.

NAB’s group executive for personal banking, Gavin Slater, said the bank was a market leader when it came to rates.

“NAB is committed to driving competition in the banking industry and providing our customers with the best products and great service because what’s good for our customers is good for our business,” he said.

“We have seen increased demand for fixed-rate home loans in the past 12 months, so we know many homeowners are looking for certainty, whether they are investors or first home buyers, and NAB is offering that through these market-leading fixed home loan rates.”

Please contact one of The Hrkac Group Geelong Finance specialists today via Contact Us, email or phone 03 5224 2366.

Geelong Finance brokers and Conveyancing teams at The Hrkac Group were pleased with Interest Rate Reduction announcement.

The Geelong Finance and Conveyancing team is pleased that just moments after the Reserve Bank Australia (RBA) announced it would cut the official cash rate by 25 basis points, two of the majors have announced they will pass on the full rate cut to borrowers.

In an announcement on its Twitter feed, National Australia Bank said it would cut its standard variable rate by 25 basis points. CBA has also just announced that they are passing on the full 0.25% reduction. The rate cut takes NAB’s SVR to 6.13 percent and CBA’s to 6.15 percent. More are expected to follow.

This is the first time in a long time that any of the majors have chosen to pass on the RBA’s rate cut in full.

Contact Us now at The Hrkac Group Finance Broker team to review your business and personal loans and ensure you are benefiting from the low official cash rate.

Whether you are buying your first house or your fifth house, your dream home or investment property for future financial security, our in house Geelong Conveyancer is here to help every step of the way with advice and efficient and friendly service… always going that extra step to make sure things run smoothly.

As a full-service office, our conveyancing services now extend to cover business sales and purchases as our licensed conveyancer has the qualifications and experience to assist in those areas of conveyancing also.

Advice regarding government grants and concessions is also available and our in-house Geelong finance department completes the full gamut of services needed to make your next purchase or sale a stress-free one…