NSW Deposit Bonds: When & How to Use Them
A deposit bond replaces the traditional 10% cash deposit with a guarantee from an insurer. Useful for buyers whose funds are tied up in a sale, super, or investments — but not all NSW vendors accept them.
Quick Answer
A deposit bond is a guarantee issued by an insurance company (Aussie Bonds, Deposit Power, Deposit Assure) that replaces the 10% cash deposit on a NSW property purchase. The bond costs 1.2–1.5% of the bond amount for short-term bonds (under 6 months) and up to 4–6% for long-term bonds (24+ months for off-the-plan). Deposit bonds require: (1) the vendor's consent (some refuse them, especially at auction), (2) approval from the bond issuer based on the buyer's evidence of funds, and (3) inclusion in the contract as a special condition. They do NOT replace the deposit — at settlement, the buyer must pay 100% of the price including the deposit amount in cash. Deposit bonds are most useful for buyers waiting on the sale of another property, buyers using super (FHSS scheme), and off-the-plan buyers with long settlement times.
How NSW deposit bonds work
A traditional NSW property exchange requires the buyer to pay 10% of the purchase price as a deposit on the day of exchange. This deposit is held by the agent or vendor's solicitor in trust until settlement. For some buyers, providing $80,000–$200,000 cash on short notice is impractical. A deposit bond replaces that cash with a guarantee. The insurer promises to pay the deposit if the buyer defaults. The bond is issued on a specific contract and runs from exchange to settlement. The buyer pays the bond fee upfront. At settlement, the buyer pays 100% of the price (including the deposit amount), and the bond is returned and cancelled.
When NSW vendors accept deposit bonds
Vendor acceptance of deposit bonds varies and must be confirmed before exchange:
- Private treaty sales — most NSW vendors accept deposit bonds if requested upfront and the bond issuer has a strong rating.
- Off-the-plan apartments — most developers accept deposit bonds (long-term bonds available up to 60 months).
- Auctions — most auction vendors REFUSE deposit bonds. If you want to use one at auction, get written consent from the vendor's agent BEFORE auction day.
- Mortgagee in possession sales — generally refuse deposit bonds.
- Government / Crown sales — generally refuse deposit bonds.
- Strata-titled units in older buildings — vendor preference varies.
When deposit bonds make sense for NSW buyers
Deposit bonds are most valuable in these scenarios:
- Buyer is selling another property and the funds will be available at settlement but not at exchange.
- Buyer's funds are in long-term investments, term deposits, or super (FHSS) that take time to release.
- Buyer is purchasing off-the-plan with a 24–48 month settlement and doesn't want $100K+ tied up in trust earning no interest.
- Buyer has equity in an investment property but no liquid cash.
- Buyer is bridging between two purchases.
- Buyer wants to keep funds in offset account to reduce interest charges until settlement.
Deposit bond risks NSW buyers should know
Deposit bonds are not free money. Risks include:
- Bond fee (1.2–6% of bond) is non-refundable — it's still payable even if you withdraw before settlement.
- If you default after exchange, the insurer pays the vendor and then claims the FULL deposit from you (plus damages).
- Some lenders refuse to fund settlement if a deposit bond was used (rare but check your loan conditions).
- Bond approval requires evidence of capacity to settle — financial statements, lender pre-approval, sale contract for current property.
- Long-term bonds (off-the-plan) cost much more than short-term bonds.
NSW Deposit Bond Cost Comparison
Indicative costs for deposit bonds across different bond terms and amounts. Actual rates vary by issuer.
| Bond Term | Typical Fee Rate | On $100,000 Bond | On $200,000 Bond |
|---|---|---|---|
| Up to 6 months | 1.2% – 1.5% | $1,200 – $1,500 | $2,400 – $3,000 |
| 6 to 12 months | 1.8% – 2.5% | $1,800 – $2,500 | $3,600 – $5,000 |
| 12 to 24 months | 3.0% – 4.5% | $3,000 – $4,500 | $6,000 – $9,000 |
| 24 to 48 months (off-the-plan) | 5.0% – 6.5% | $5,000 – $6,500 | $10,000 – $13,000 |
Sources: Aussie Bonds, Deposit Power, Deposit Assure 2025 published rate cards. Ask your conveyancer for current quotes.
How to Use a NSW Deposit Bond
Discuss deposit bond with vendor BEFORE exchange
Have your conveyancer obtain the vendor's written consent that a deposit bond is acceptable. Without consent, the vendor can refuse and walk away from your offer.
Apply to a deposit bond issuer
Contact Aussie Bonds, Deposit Power, or Deposit Assure. Provide income statements, lender pre-approval, and (if selling another property) the contract for that sale.
Pay the bond fee
Pay the upfront fee (1.2–6% depending on term). The fee is non-refundable from issue.
Provide bond at exchange
Your conveyancer provides the original deposit bond to the vendor's conveyancer at exchange. The bond replaces the cash deposit.
Pay 100% at settlement via PEXA
On settlement day, pay the full purchase price (including the deposit amount). The bond is cancelled and returned to you.
Frequently Asked Questions
Common NSW questions answered by Elyment Conveyancing — written for buyers, sellers, and investors.
A deposit bond is a guarantee from an insurance company that replaces the 10% cash deposit on a property purchase. The bond costs 1.2–6% of the bond amount, depending on the term.
Generally no. Most NSW auction vendors require cash deposits on the day. To use a deposit bond at auction, you need written consent from the vendor's agent BEFORE the auction.
Short-term bonds (under 6 months) cost 1.2–1.5% of the bond amount. Long-term bonds for off-the-plan (24+ months) cost 3–6%. On a $100,000 bond, that's $1,200–$6,500.
Yes. The deposit bond does NOT replace the deposit money — it just delays payment. At settlement, you pay 100% of the purchase price including the deposit amount.
The bond issuer pays the vendor the deposit amount (typically 10%), then claims the full amount back from you, plus their costs and any other damages. You still lose the deposit — and more.
Yes. Deposit bonds are commonly used by first home buyers whose funds are in the FHSS super scheme and won't be released for 30+ days. Bond issuers will assess your evidence of capacity.
Most lenders accept deposit bonds without issue. A handful of lenders prefer cash deposits — check with your broker. Lender approval is a separate process from bond approval.
Typically 24–72 hours for short-term bonds with simple applications. Complex applications (multiple incomes, business owners, long-term off-the-plan) can take 5–10 business days.
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