Deposit Bonds

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Gazumped
Member
@gazumped
Join Date: 2004
Post Count: 13
February 28, 2004 - 9:03 am
Hi All,
Anyone worked with Deposit bonds on new properties. Any quick pros and con tips incase I’m missing something. It sounds too good to place a deposit on a 2 year development and try to sell it off prior to completion. Or perhaps even hold for 3 years for the depreciation then sell.
Thanks,
Lee.
Mortgage Hunter
Participant
@mortgage-hunter
Join Date: 2003
Post Count: 3,781
February 28, 2004 - 9:14 am
Many people are finding that it is too good to be true as they are now trying to onsell apartments worth less than their contract price.
Be careful and do your research well.
Do a search for OTP.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
kay henry
Member
@kay-henry
Join Date: 2003
Post Count: 2,737
February 28, 2004 - 2:48 pm
lee,
With deposit bonds, just be sure you have enough money to pay for the joint in case you can´t onsell. You´ll be up for at least the full deposit and lose a whole lot of money with legals etc if you pull out of the deal before the due date.
OTP apartments can be a good thing if you buy into an A-grade block, with some distinguishing features. But buzing into a block where everyone will be selling at settlement can only devalue your property.. supply and demand… look up ´docklands melbourne´in google to see what oversupply of OTP´s has done in that area.
kay henry
woodsman
Member
@woodsman
Join Date: 2004
Post Count: 714
February 28, 2004 - 4:15 pm
Lee,
When you go for a deposit bond application, you will essentially be placing an application which is on par to a loan application. Therefore, you would essentially have to qualify for a loan to settle the property before being given the deposit bond.
In addition, bond insurers want approximately 5 times in equity for the deposit bond required.
eg Purchase Price = $400k
Deposit Bond (10%)= $40k
Net Equity required =$200k
Some builders (smaller ones admittedly) are more reluctant to accept deposit bonds because of the abuse of then in the last few years. At the very least, ensure they re-insurers are a reputable insurer like, GE Finance.
James