How deposit bonds can help you attain home ownership
Home ownership is a dream that is common to everyone all over the world. There are however certain things that you need to have in place before you purchase a home. You need to have a source of income, a decent credit history, and some cash to buy the home. Since many potential home buyers are finding themselves strapped for cash, there is a way for them to get around having to put down 10 to 20% in cash. The solution is deposit bonds. Let’s take a look at how a deposit bond can help you own the home of your dreams.
What is a deposit bond?
A deposit bond is an alternative to putting down a cash down payment. A potential home buyer will purchase a deposit bond from an underwriter who guarantees the payment of the bond to the home builder. Deposit bonds are accepted by most builders because it is a guarantee that they will receive the entire down payment.
How much is a deposit bond?
A deposit bond costs 4.5% of the total deposit amount. If you had to put down $20,000 for a home loan purchase or a refinance then you would need to pay $900 for the deposit bonds. That is a whole lot more affordable than putting the $20,000 down while you wait for the home to be completed. There are also some taxes and fees added into the price of the deposit bond.
Why would someone get a deposit bond?
Let’s assume you have finished all of your home loan comparison and have settled on a house. The house that you want to buy will not be completed for at least a year or two. You can either give them the whole down payment now or give them a deposit bond instead. If you give them the whole down payment now, your money will be tied up for years making you nothing.
What are the advantages of a deposit bond?
Deposit bonds are a whole lot cheaper than other forms of financing. If you were to take out a personal loan or borrow the money, you would have to pay interest on this loan and pay your mortgage payment as well. A deposit bond can also buy you the time to come up with a down payment until your loan is complete. You do not have to come up with the funds to complete the loan process until closing.
Consider using a deposit bond for your next home purchase or refinance.
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