A Deposit Power Guarantee is a substitute for the cash deposit between signing contracts and settlement of the property purchase. The Deposit Power Guarantee replaces the need for a 5% or 10% cash deposit when contracts are exchanged. Rather, the purchaser pays 100% of the purchase price at settlement.
Deposit Power Guarantees can be issued for up to 10% of the purchase price on most types of property with settlement terms of up to 48 months.
There are many scenarios when a purchaser may need a deposit guarantee to assist in securing their new home or investment property. Purchasers often find themselves in a situation where they have the ability to settle on a property, however may not have the cash readily available to put a deposit down. Some common scenarios include:
- Buying and selling simultaneously
- Investors borrowing the full purchase price
- First Home Buyers who do not have the full 10% cash deposit
- Downsizers with all their cash tied up in their existing property
- Buying off-the-plan and not wanting to tie up cash for years
Deposit Guarantees are ideal for anyone who is asset rich but cash poor, first home buyers or for purchasers simply not wanting to use their own investments until settlement.
Any Australian permanent resident, registered company, trust or self-managed superannuation fund are eligible to apply.
A Deposit Power Deposit Guarantee can be issued for all or part of the deposit amount required, up to a maximum of 10% of the purchase price. Deposit Power Guarantees are usually available for property purchases up to $5,000,000.
Deposit Power offers two types of guarantees, a Short Term Deposit Guarantee for settlements up to 6 months, and a Long Term Deposit Guarantee that can be used to secure properties with settlement terms of up to 48 months. Approval requirements for each of these guarantee types vary depending on the given scenario.
Deposit Guarantees can be issued for most situations and types of properties including first homebuyers, investors, simultaneous settlements, vacant land, off-the-plan purchases, auctions and private treaty purchases.
This is used when referring to a title for established properties where the land has been registered with the Lands Title Office (or similar department, depending on the State) and have therefore been assigned a “Lot” and “DP”/”SP” number (DP = Deposited Plan, SP = Strata Plan). These details will be noted on the Contract of Sale in the Land section and in most cases will result in a specific settlement date being scheduled. Registered properties generally have a settlement date within 6 months from the contract date, making the Short Term Deposit Power Guarantee ideal when purchasing these types of property.
Unregistered, properties are incomplete land titles and are therefore not ready to be registered with the Lands Title Office (or similar department, depending on the State).
This is common when purchasing off-the-plan apartments and in some cases vacant land and will be clearly noted as unregistered in the Contract of Sale in the Land section. In regards to off-the-plan, as the construction is ongoing, a specific settlement date is unable to be provided from the vendors and instead a “Sunset” or “Registration” date will be noted in the contract of sale. Unregistered properties usually require a Long Term Deposit Power Guarantee in order to fulfil the deposit clause in the contract of sale.
In some circumstances we may request that parties who are not listed as purchasers in the Deposit Power Deposit Guarantee application complete a Guarantee & Indemnity form. Completing the Guarantee & Indemnity form ensures that all parties including Guarantors are fully aware of their obligations.
Guarantor parties fall into the following categories;
- Company Directors
When a Company (including a Company as Trustee for a Trust) is applying for a Deposit Power Deposit Guarantee, in addition to authorising the Company to purchase the Deposit Guarantee by completing the application form, Company Directors will also be required to complete the Guarantee & Indemnity form.
- Family Members
At Deposit Power we understand that many people get their start in the property market with help from their family. In situations where First Homebuyers would normally be ineligible for a Deposit Guarantee, we are usually happy to consider an application where an immediate family member will act as a Guarantor. To act as a Guarantor, family members need to own an existing property with sufficient equity to satisfy our requirements. Family members acting as a guarantor are required to complete the Guarantee & Indemnity form.
Either apply directly to Deposit Power on this website or through an accredited Deposit Power mortgage broker, lender or finance specialist.
Should the purchaser default under the contract sale and be liable to forfeit the deposit, the seller may lodge a claim on the Deposit Guarantee for the deposit amount. Upon receipt of a valid claim, Deposit Power as Authorised Manager for the Guarantor, assesses the claim and if valid, instructs Perpetual Corporate Trust Limited to make payment to the deposit holder noted in the Contract of Sale. Deposit Power will then seek to recover the deposit amount from the purchaser.
A Long Term Deposit Guarantee can be used to secure residential property sold off-the-plan, under construction or vacant land where an extended settlement period is required.
Using a Deposit Guarantee in lieu of a cash deposit when buying off-the-plan will allow a buyer to retain their cash in savings or other investments such shares right up until settlement.
As property developments can often experience delays beyond the vendors control, it is standard practice for a “Sunset” or “Registration” date to be inserted into the Contract of Sale in lieu of an actual settlement date. This date indicates when the property must be registered by (without which settlement cannot occur).
The Sunset/Registration date is usually found in the Special Conditions of the Contract of Sale and dictates the term a Deposit Power Guarantee must be issued for. As with any Contract, each clause should be read in the context of the entire contract and we therefore recommend that you refer to your legal representative when trying to determine the Sunset/Registration date (some contracts may contain wording or additional clauses that effectively extend this date). These types of property purchases usually require a Long Term Deposit Power Guarantee.
Yes. A Deposit Power Deposit Guarantee is ideal for auctions and is issued prior to the purchaser prior to attending the auction. The maximum guarantee amount is shown on the guarantee certificate whilst the seller, property details and purchase price are left blank. This is done so a purchaser can attend and ‘bid at’ a number of auctions with the one guarantee. The seller and property details and purchase price are completed on the guarantee certificate when the purchase is the successful bidder and the final purchase price has been determined.
The guarantee amount is limited to the maximum amount of guarantee shown on the certificate or 10% of the purchase price whichever is the lesser.
Yes. We understand that depending on negotiations between purchaser and vendor deposit amounts can vary anywhere between 1% up to 10% of the purchase price. We also know that at other times a purchaser may want to split their deposit between cash and a Deposit Guarantee. Deposit Power Deposit Guarantees are designed with this flexibility in mind.
The Deposit Power Guarantee is legally valid and available in all states and territories in Australia. The Deposit Power Deposit Guarantee is widely accepted as a cash deposit substitute. Deposit Power has been issuing Deposit Guarantees in Australia for close to 30 years and is therefore very familiar and acceptable to estate agents, solicitors, conveyancers and sellers (vendors).
All Deposit Power Guarantees have an expiry date. A Deposit Power Deposit Guarantee expires on the earliest of when:
- The Contract of Sale is complete; or
- The Guarantor pays the amount required to be paid under this Guarantee; or
- The Contract of Sale is terminated or rescinded and, in either case, the Vendor has accepted in writing the termination or rescission and the Purchaser is entitled to a refund of the deposit; or
- 5:00pm Sydney time on the earlier of the Date of expiry or, the Date of Expiry falls on a weekend or a public holiday in Sydney, the immediately preceding business day.
Yes. The guarantee represents the deposit until settlement and does not remove the purchaser’s obligation to pay the full purchase price to the seller at settlement.
Deposit Power Deposit Guarantees are issued on the understanding that the purchaser remains responsible for the deposit amount guaranteed. Signing and agreeing to the Counter Indemnity and acknowledgment in the application form is the purchaser’s acknowledgement of their responsibility and liability in the event that they default under the terms of the Contract of sale.
In simple terms, should the purchaser default under the purchase contract and the seller makes a claim, Deposit Power on behalf of the Guarantor will seek repayment of the claim amount from the purchaser.
Deposit Power charges a one off up-front fee. There are no other fees or on-going charges involved.
The fee for a short term Deposit Guarantee (up to 6 months), in most cases, is calculated as a flat percentage of the guarantee amount. Fees for long term Deposit Guarantees are based on the guarantee amount and term.
Fees for all types of Deposit Power Guarantees can be obtained by clicking on the “Quote” button on the top right hand side of this web page.
Refunds for Short Term Deposit Guarantees will only be provided where the Guarantee has not been used (provided to the vendor/s) and the original Deposit Guarantee Certificate has been returned to Deposit Power within 30 days of the date of issue. An administration fee of $220.00 will be deducted from any refund amount that relate to short term guarantees.
For Long Term Deposit Guarantees a refund will be considered where the Guarantee has not been used (provided to the vendor/s) and the original Deposit Guarantee Certificate has been returned to Deposit Power within 30 days of the date of issue. An administration fee of $700.00 will be deducted from any refund amount that relate to long term guarantees.
A rebate may be considered for Long Term Guarantees in the event the purchase property settles and the original Deposit Guarantee Certificate is returned to Deposit Power with at least 6 months remaining before the Guarantee expiry date. To apply for a rebate the Applicant must return the original Guarantee with a covering letter from the vendor’s solicitor confirming the date the property settled. In order to qualify for a fee rebate, both the original Guarantee and the solicitor’s letter must be received by Deposit Power at least 6 months prior to the expiry date of the Guarantee.
In the event that the purchaser defaults under the terms of the contract of sale, the seller may be entitled to make a claim on the Deposit Power Deposit Guarantee. To make a claim, the seller or their legal representative must provide certain information and documents. The term and conditions of the guarantee are contained on the reverse of the guarantee certificate and can also be obtained here.
To ensure a local, timely and independent claim process, a custodial fund has been established with Perpetual Corporate Trust Limited (Perpetual) to be used solely for the payment of Deposit Guarantee claims.
As the Authorised Manager of the Guarantor, DP Bonds Pty Ltd (Deposit Power) is authorised to accept, assess and instruct Perpetual to pay valid claims. Nominated parties from Deposit Power are listed as having sole authority to instruct Perpetual to make payment. Such authority to instruct Perpetual is made independently of and without reference to the Guarantor of the Deposit Power Guarantee, Lombard Insurance Company Limited.
Claim payments are made within 2 clear business days of a valid claim being received.
Lombard Insurance Company Limited (Lombard) is the Guarantor of the Deposit Power product. They are an international trade and commercial insurance provider who have been providing capacity to the Australian insurance market for over 10 years.
To ensure a local, timely and independent claim process, Lombard have established a custodian fund with Perpetual Corporate Trust Limited (Perpetual) to be used solely for the payment of Deposit Guarantee claims.
As the Authorised Manager of the Guarantor, DP Bonds Pty Ltd (Deposit Power) is authorised to accept, assess and instruct Perpetual to pay valid claims. Authorised staff at Deposit Power have sole authority to instruct Perpetual to make payment. Such authority to instruct Perpetual is made independently of and without reference to Lombard.