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Downsizing for retirement: how deposit bonds simplify buying
What is a deposit bond for downsizing?
What it isn’t
- A home loan
- A bank guarantee
- Expensive
- Full of red tape
What it is
- A deposit guarantee
- Secure as cash
- Legal and trusted
- Widely accepted
Downsizing in retirement can be a smart move to free up equity and create the lifestyle you want. However, if most of your wealth is tied up in your current home, it can be tough to access funds to put a deposit on a new place.
That’s where deposit bonds come in. A deposit bond acts as a guarantee to the seller that you’ll pay the full deposit at settlement.
This way, you can secure your next home before your current one sells. There’s no need to dip into your savings, sell off investments or dip into your super. Deposit bonds provide a simple, stress-free way to move into your next chapter with confidence.
It’s that simple.
Why many retirees consider downsizing
Downsizing in retirement can be a smart financial and lifestyle move. A smaller home means reduced maintenance and less cleaning, so you’ll have more time to enjoy your retirement. The financial advantages can be significant too:
- Release equity from your family home to boost retirement funds
- Reduce ongoing costs like council rates and insurance
- Better access to services if you potentially move to a more convenient location
- Simplify your lifestyle and cut down on the physical demands of maintaining a larger property
Timing the sale of your home with the purchase of your next one can be tricky, especially if you’re relying on that sale to fund your deposit. Deposit bonds help to bridge the gap, giving you the freedom to buy your new home now and sell later.
Can retirees use a deposit bond to downsize?
Absolutely. If you’re ready to downsize but haven’t yet sold your current property, a deposit bond can help you move forward. It means you can make an offer or even bid at auction without needing to access a large upfront deposit.
The process is straightforward: the deposit bond guarantees payment of the deposit amount to the vendor at settlement. This gives retirees greater control over timing, location and lifestyle. No need to rush the sale of your current property or stress about liquidating assets early.
Do pensioners qualify for deposit bonds?
Yes, most pensioners can qualify for a Deposit Power bond. If you can afford the property, we’ll cover the deposit.
Find out of you qualify for a deposit bond.
How can deposit bonds help retirees looking to downsize?
Buy before you sell
Find and secure your dream retirement home while still living in your current one. No need to move twice or rush your decision.
Protect your savings
Don’t touch your hard-earned superannuation or retirement savings money for a deposit. Your nest egg stays where it belongs – working for your future.
Reduce settlement stress
A deposit bond gives you breathing room to arrange a settlement timeframe that suits you.
Maintain financial flexibility
Keep your cash available for other expenses like moving costs, new furniture or unexpected repairs.
Avoiding the pitfalls of traditional deposit options
When it comes to paying a property deposit, traditional options like bank guarantees or bridging loans aren’t always practical – especially in retirement.
Bank guarantees: a complicated and costly option
Bank guarantees aren’t always available for retirees. When they are, they often come with hefty requirements. Here are some reasons why bank guarantees don’t always work for downsizing:
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Application process can be lengthy and complex
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Banks often charge establishment fees and ongoing fees
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Require security in the form of cash or term deposits
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Your funds remain locked away until settlement
For retirees whose wealth is primarily in property, accessing a bank guarantee can be particularly difficult.
Bridging finance: expensive and inconvenient
While bridging loans can help you purchase before selling, they come with significant drawbacks such as:
- High interest rates compared to standard mortgages
- Additional fees and charges that eat into your equity
- Pressure to sell your existing property quickly
- Servicing two loans simultaneously can be stressful
- Complex approval processes that can delay your purchase
Deposit bonds offer a simpler alternative without the financial burden and stress of bridging finance, making them a great solution when downsizing in retirement.
Benefits of using a deposit bond for downsizing when retiring
When it comes to downsizing for retirement, Deposit Power offers a simple way to secure your next home without the financial stress. Whether you're buying before selling or looking for more flexibility, here are some key benefits of using a deposit bond when downsizing in retirement
Make offers with confidence, even before settlement
Found the perfect new home before your sale goes through? No problem. A deposit bond lets you move forward with confidence, knowing you can make an offer or sign a contract without needing the full deposit up front.
Avoid dipping into superannuation
Your retirement savings and super are there to support your lifestyle, not to be used up on an upfront home deposit. With a deposit bond, you can secure your next home without needing to access large sums of cash. That means more money stays in your account, where it continues to work for you.
Bridge the financial gap while selling your home
Timing is everything in real estate, but settlements rarely happen on the same day. A deposit bond bridges that gap, so you don’t have to delay purchasing your next home just because your current one hasn’t sold yet.
Keep your investments intact and reduce financial stress
Selling assets to access cash has tax implications and can disrupt your financial plans. A deposit bond lets you leave your investments untouched, easing the pressure during your move.
Secure an off-the-plan property
Buying off the plan can mean waiting months or even years for your new downsized home to be ready. A deposit bond lets you lock in the property now without having your cash tied up during the construction period.
Bid at auction without needing a cash deposit
Auction day can be stressful. With a deposit bond in hand, you can bid with peace of mind, knowing the deposit is covered. Once the hammer falls, simply present your digital bond QR code to the vendor or agent. It acts as your deposit on the spot, with no need to transfer funds immediately.
How deposit bonds and downsizer super contributions can work together
Combining a deposit bond with the downsizer super contribution initiative can offer even more financial freedom.
If you’re 55 or over, you may be able to put up to $300,000 from the sale of your home into your super. A deposit bond lets you buy your next property before your current home sells, and once it does, you can use the proceeds to boost your super. It’s a smart way to take advantage of both options.
It’s worth discussing with your financial advisor or super fund to see how these benefits could work in your favour.
Eligibility criteria for retirees applying for a deposit bond
Retirees can qualify for a Deposit Power bond through two main pathways, depending on your financial situation and the term length of the bond.
Option 1
The Fast Track
This is a good option if you can demonstrate that you have the necessary funds to complete the property purchase.
Acceptable evidence includes:
- A loan approval letter
- Recent savings statements
- Proof of a financial gift
This pathway is for short-term bonds (up to 6 months) and is suitable for retirees who have accessible funds or approved financing.
Option 2
Home Equity Assessment
If you own property with sufficient equity, you may qualify based on the value of your existing assets. This option is particularly beneficial for retirees who own their home outright or have significant equity, making it possible to secure a deposit bond without liquidating investments or accessing superannuation funds.
The equity requirements vary depending on the bond amount and term.
Retiree downsizing deposit bond FAQs.
How much does a deposit bond cost for retirees?
Deposit Power bonds come with a one-off fee based on the bond amount and length – no interest, no repayments, no surprises.
How quickly can deposit bonds be issued?
You’ll receive approval almost immediately after you apply.
Your digital deposit bond will be delivered to your device within minutes.
Are deposit bonds a good idea?
A deposit bond is a smart choice when you’re downsizing for retirement. It’s a digital certificate used instead of a standard cash deposit. It simply lets you delay the payment of the deposit until settlement.
What documents do retirees need to apply for a deposit bond?
Getting approved for a deposit bond is simple. Deposit Power offers flexible options to fit your needs, whether you’re after a short-term bond for a quick settlement or a longer-term solution for an off-the-plan purchase.
The documents you’ll need to provide depend on what type of deposit bond you’re applying for. Generally, you’ll need to provide ID documents and evidence that you’ll be able to afford the property at settlement.
If I sell my house, how long do I have to buy another one before I lose my Age Pension?
If you sell your principal home when downsizing for retirement, the proceeds are exempt from the Age Pension assets test for up to 12 months, provided you intend to use the money to purchase another home.
During this period, using a deposit bond can help you secure your new property while maintaining pension eligibility.
Always check with Services Australia as policies may change.
Ready to make your move?
If you’re thinking about downsizing in retirement, a deposit bond could be the key to a smoother, more flexible transition. It allows you to move on your terms with less stress, more options, and no upfront cash deposit required.