Home / Straight Answers / Deposit bond
Straight Answers · How this works
What is a deposit bond?
Bayley Clarke · Mortgage broker on the road · Last checked 3 September 2026 · 3 min read
The short answer
A deposit bond is a piece of paper we give to the conveyancers and the agent to say you are good for the deposit, you just don't have the liquid cash to transfer today. It's a substitute for cash, and you pay a fee for it.
It earns its keep on guarantor loans, where the bank is lending the full purchase amount and you don't have the 5% or 10% sitting there, and on bridging, where the bank funds the whole next purchase. It substitutes your cash as long as we can show the money is coming on settlement day.
The ninety second version. The rest of this page is the detail underneath it.
What it is
A deposit bond is a piece of paper that we get and give to the conveyancers and the agent to say that you are good for the deposit. You just don't have the liquid cash to be able to transfer it today. So the deposit bond is a substitute for liquid cash.
You do generally pay a fee for it, a small percentage of the deposit amount, charged by the bond provider. It's an insurance-style guarantee: if you failed to settle, the provider pays the seller the deposit and comes after you for it. Which is why they only issue one when the money is clearly coming.
When you'd use one
A common one is when you're using a guarantor and you're borrowing the full amount for the purchase, because you're short on deposit and you don't have the full 5% or 10% available as cash. The bank is going to give you the entire amount to buy that property, so the deposit bond satisfies the deposit conditions of the contract.
The other time is bridging, where the bank is funding the full next purchase as well. Your deposit is tied up in the house you haven't sold yet, so the bond stands in for it until settlement.
What the provider needs to see
Pretty much it substitutes your cash providing we can show that either the bank is going to be providing the full amount, or you've got other assets tied up that will be available on the day of settlement, so you do actually have enough cash to buy the property on the day.
That usually means a formal or conditional approval in hand. The bond provider is lending their name against the bank's yes. The timing of the deposit deadline in the contract is what drives when we apply for it.
The honest bit: a bond doesn't fix a deposit problem, it fixes a timing problem
The bank still needs to see the deposit exists somewhere: in a guarantor's equity, in the house you're selling, in an account you can't touch until settlement. The bond just bridges the gap between when the contract wants cash and when the cash is free.
If the deposit doesn't exist at all, a bond isn't the answer. The guarantor or the 5% scheme is.
Buying with a guarantor or bridging and the cash isn't free yet?
A 30 minute call. I'll check whether a deposit bond fits your contract, line it up with the bank approval, and get it issued before the deadline.
No cost to you, ever. The bank pays me when a loan settles. · How I get paid
Next question
When do I pay the deposit to the agent, and where does it go?The deadlines the bond has to meet.
Related answers
Do I have to sell my current home before I buy the next one? Should I pay my debts off or keep the money for my deposit? Can I use money sitting in my parents' account as savings?Not your question? Book a call and ask it, or call 0437 189 939.