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A deposit bond is an insurer's written promise to pay the seller your contract deposit if you default. It replaces the cash deposit at exchange. It does not pay for any of the purchase, and you still fund the full price at settlement. You pay the issuer a fee on top of every other cost, and you sign an agreement to repay the insurer if it ever has to pay out. Whether a bond is allowed depends on the contract and the seller.
What is a deposit bond?
A deposit bond is a financial guarantee that substitutes for a cash contract deposit. Its format and delivery requirements depend on the issuer and your contract. The seller holds the bond instead of money. Deposit Power says plainly: "It is not a loan." Deposit Bond Australia says a bond can be for up to 10% of the agreed purchase price.
Three parties are involved:
- You (the buyer) apply, pay the fee and sign an indemnity.
- The issuer and its insurer promise the seller the deposit amount if you default.
- The seller is the beneficiary. The bond protects the seller, not you.
That last point catches people out. Paying the fee does not insure you against walking away from the purchase. The insurer can recover from you any amount it pays the seller.
How does a deposit bond work, step by step?
There are six steps. The order can change with the state, the contract and whether the sale is by auction, so treat this as a general outline and not a fixed sequence.
- Check the contract first. Ask your conveyancer whether the contract lets you pay the deposit by bond, and on what terms. The seller must agree to accept one.
- Apply to an issuer. You give details of the purchase and show you can complete it. The issuer assesses you. Issuer approval and seller acceptance are two separate decisions.
- Pay the fee. Deposit Bond Australia says its fees are paid once, on approval and before the bond is issued.
- Sign the indemnity. ENAYBL describes a Counter Indemnity Agreement that lets the insurer recover any amount paid to the seller if you default. It says you do not need to provide security.
- Deliver the bond. It goes to the seller or the seller's representative as the contract requires, usually at or before exchange.
- Settle. You pay the full price at settlement. Deposit Power says the bond expires once settlement is completed.
If you default under the contract, the seller may claim on the bond. The issuer assesses the claim and pays valid claims under the bond terms, then seeks recovery from you. Lawful rescission is different and depends on the contract. Other consequences of default sit in your contract, so read those with your conveyancer.
What happens to a deposit bond at settlement?
At settlement you pay the full price, less any cash deposit you already paid. Deposit Bond Australia says that where no cash deposit was paid, the purchaser must pay 100% of the agreed contract price plus acquisition costs. The bond is not a payment. It is a promise, and it ends when the sale completes.
The table below shows a $600,000 purchase with a $60,000 contract deposit and an example loan of $480,000, paid out by the lender at settlement. The bond fee uses ENAYBL's published short term rate of 1.5% of the deposit amount. It is an illustration, not a quote. Your acquisition costs (duty, adjustments, legal costs and lender charges) come on top of every figure shown.
| Structure | Cash deposit at exchange | Bond face value | Bond fee (1.5% example) | Price balance at settlement | Your funds at settlement (balance less $480,000 loan, plus fee) | Your own funds over the whole purchase (before acquisition costs) |
|---|---|---|---|---|---|---|
| Cash only | $60,000 | $0 | $0 | $540,000 | $60,000 | $120,000 |
| Half cash, half bond | $30,000 | $30,000 | $450 | $570,000 | $90,450 | $120,450 |
| Bond only | $0 | $60,000 | $900 | $600,000 | $120,900 | $120,900 |
Two things stand out. In this short term example the bond fee is an additional cost, and the whole of your own contribution is still needed. The more of the deposit a bond covers, the more you must find at settlement: $60,000 with cash only, and $120,900 with a bond only. Your loan and your own funds together must cover that whole balance, the fee and your acquisition costs. A bond moves the date you need the money. It does not reduce the amount.
Does a deposit bond replace my home loan deposit?
No. The contract deposit and the contribution your lender expects from you are different things. A bond only stands in for the contract deposit at exchange. Your lender still looks at the funds you bring to settlement. A bond cannot make up for savings you do not have, because the full balance is due at settlement either way.
To see how much you need to bring, read our guide to how much deposit you need. If a family member is helping with security, read how a guarantor home loan works. That is a loan arrangement. A deposit bond is a contract deposit arrangement.
When does a deposit bond make sense?
A bond helps with timing, not with affordability. The cases issuers describe are ones where your money is not yet free at exchange, such as proceeds from selling another home that settle on the same day as the purchase. It can also help when you want to keep cash in an account for a few more months. In each case you must still be able to settle. If you cannot show that, expect the issuer to ask more questions.
Who issues deposit bonds in Australia?
Three issuers (Deposit Power, Deposit Bond Australia and ENAYBL) published their own terms on pages we read on 28 October 2026. This is not a list of every distributor in the country.
| Issuer | Insurer named on its page | Terms it publishes |
|---|---|---|
| Deposit Power | HDI Global Specialty SE | Short term up to 6 months; long term up to 66 months |
| Deposit Bond Australia | QBE Insurance (Australia) Limited | 3 to 66 months for most residential and commercial property |
| ENAYBL Deposit Solutions | QBE Insurance (Australia) Limited | Short term up to 6 months; long term over 6 months, with a calculator that lists terms up to 66 months |
Deposit Power and ENAYBL describe themselves as authorised agents. Deposit Power announced on 9 April 2026 that it was acquiring Deposit Assure, whose website now redirects to Deposit Power. Deposit Power also says bonds issued before October 2023 were underwritten through Lombard Insurance Company Limited. If you hold an older bond, ask the issuer in writing who stands behind it.
How much does a deposit bond cost?
1.5% of the deposit amount is ENAYBL's published fee for a term up to 6 months. Its longer term guide is around 3% a year, paid upfront. Deposit Bond Australia publishes two conflicting schedules, shown separately below, and Deposit Power publishes no percentage. There is no single market rate, so ask for a written quote for your own purchase.
| Issuer and page | What it publishes | Page date |
|---|---|---|
| ENAYBL, frequently asked questions | Short term: 1.5% of the deposit amount, up to 6 months. Long term: around 3% a year of the deposit amount, payable in advance. | No date shown. Its QBE rating note is dated 15 March 2025. |
| Deposit Bond Australia, product information | The annualised cost "range from 1.5 to 3.3%". Higher for complex applications or structures. Paid once, before issue. | No date shown. Page metadata: published 12 July 2018, modified 14 February 2020. |
| Deposit Bond Australia, common usage page | From 1.15% of the bond value (with finance, under 6 months) to 3.2% a year (without finance, 3 to 66 months). Described as a one time fee. | No date shown. Page metadata: published 29 April 2020, modified 21 July 2022. |
| Deposit Power, frequently asked questions | A one off fee. No percentage published. You get a figure from its quote calculator, which it describes as indicative. | No date shown. Copyright notice 2025. |
Deposit Bond Australia's two pages give different ranges and neither shows which is newer, so we show both. Do not treat either as today's price. Ask the issuer for a written quote that states the amount, the term and every charge.
Can I get a refund if I do not use my deposit bond?
Sometimes, with deductions, and the rules differ by issuer. The two issuers that publish refund terms both set a 30 day window for an unused bond. After settlement, any rebate is limited and at the insurer's discretion.
| Issuer | Unused bond | After settlement |
|---|---|---|
| Deposit Power | Refund request must be received within 30 days of issue, and the bond must be unused. Deduction of $290 (short term) or $700 (long term). | Long term only: a rebate may be considered with at least 6 months left, with a letter from the seller's solicitor confirming the settlement date. |
| ENAYBL | The unused original bond must be returned within 30 days of the issue date. An administration fee of up to $250 may be deducted. | Long term only: a partial refund if settlement is more than 12 months before expiry, or if the seller ends the contract. You return the original bond with evidence of settlement or of the rescission. Not given if you on sell the property before settlement. "Not exactly pro rata", at the insurer's sole discretion. |
| Deposit Bond Australia | Not covered by the pages we read. | Not covered by the pages we read. |
Can a seller or agent refuse a deposit bond?
Yes. A seller does not have to accept a bond unless the contract says so. Acceptance depends on the contract and the seller's agreement, and the rules differ by state. Do not assume a bond will be taken because an issuer advertises wide acceptance.
| Where | Document | What it says | Our verification |
|---|---|---|---|
| NSW | 2026 standard contract sample, Law Society of NSW | The deposit bond clause (3.1) operates only if the vendor accepts a bond. Clause 3.2 requires delivery at or before the contract is made. | These figures come from the Law Society's 2026 sample contract, read on 28 October 2026. Your contract and special conditions may differ. |
| Queensland | Queensland Government, buying at auction (updated 14 October 2024) | A deposit bond is "usually okay" for the deposit. Ask the agent how much deposit is wanted and how it must be paid. | Read on 28 October 2026. |
| Queensland | Current standard residential contract (REIQ) | We could not open the contract's deposit clauses, which sit behind a member login. | Not verified. Ask your conveyancer or solicitor to read the clauses. |
We do not know a seller's reasons for refusing, and an agent's own view is not the legal position. Your conveyancer should confirm the seller's instructions and the contract terms in writing. See our guide on what a conveyancer does.
Can I use a deposit bond at auction?
Sometimes. Settle the question before you bid. At auction you usually sign the contract on the day and pay the deposit that day, so there is little time to sort out a bond afterwards. Queensland Government guidance says to ask the agent how much deposit is required and how it must be paid. It says a bond is usually okay, which is not a guarantee.
- Ask the agent whether a bond is accepted, and get the answer in writing.
- Confirm that approval, issue and delivery arrangements meet the contract's deposit deadline.
- Have your conveyancer read the contract and the conditions of sale.
- Get issuer approval in hand before auction day. Approval to apply is not the same as an issued bond for that property.
- Check the bond amount matches the deposit stated in the conditions of sale.
Can I use a deposit bond when buying off the plan?
You can ask, but check the limits. Off the plan and new build contracts often run for many months, so the term matters. Deposit Power says its long term bonds run to 66 months and are for off the plan, under construction or vacant land purchases. Deposit Bond Australia says that on separate land and building contracts, its QBE bond can only be used for the land component.
A bond also does not guarantee that the building will be finished. It is a deposit promise to the seller. Issuers and insurers state different maximum terms for long term bonds, so confirm the exact product terms in writing.
What happens if my deposit bond expires before settlement?
In the NSW 2026 sample, if completion has not occurred 14 days before expiry, a replacement must be served at least 7 days before expiry. Your contract and special conditions may differ. You may have to replace the bond or pay the deposit in cash by a deadline set in your contract, and that deadline can fall before the bond expires. Do not rely on an issuer's general term limit.
The sample says the seller must approve a replacement from the same issuer, for the same amount, with an expiry at least three months after issue. These figures come from the Law Society's 2026 sample contract, read on 28 October 2026. Other states and special conditions can differ.
| Trigger | Example deadline (NSW 2026 sample) | What to do |
|---|---|---|
| Completion not done 14 days before expiry | Replacement due at least 7 days before expiry | Ask the issuer about a replacement as soon as a delay looks likely |
| Replacement bond | Seller must approve one from the same issuer, for the same amount, expiring at least 3 months after issue | Ask the issuer what the replacement will cost |
What is the difference between a deposit bond, a bank guarantee and a cash deposit?
A deposit bond is issued through an insurer, a bank guarantee is issued by a bank, and a cash deposit is your own money. The labels vary between issuers, so check who the beneficiary is and what you owe if it is called.
| Cash deposit | Deposit bond | Bank guarantee | |
|---|---|---|---|
| Who backs it | You, with your own money | An insurer, through an authorised agent | A bank |
| Money moves at exchange | Yes, to the stakeholder or agent as the contract provides | No | No |
| Cost to you | None for the deposit itself | An issuer fee, set by the issuer | CommBank's published product has ongoing fees and needs cash or property as security |
| If you default | The seller can claim the deposit under the contract | The issuer assesses the claim, pays the seller if it is valid, then looks to you | Depends on the bank's terms |
| Balance at settlement | Price less deposit | Full price | Check the terms |
CommBank's published bank guarantee product is for approved business customers and business purposes, so we do not present it as a first home buyer option. A bond is also not the same as a family guarantee. For the government alternative, see the 5% Deposit Scheme, which has a minimum deposit of 5%, or 2% for eligible single parents and legal guardians.
Can a first home buyer use a deposit bond?
First home buyers can apply, but eligibility depends on the issuer and term. ENAYBL's published short term guidelines include an acceptable guarantor's property equity for first home buyers; its long term guidelines require existing property equity. Funds or loan approval alone do not establish eligibility. Ask the issuer which documents it needs. A home loan pre approval helps, but it does not by itself mean an issuer will approve a bond.
First home buyer grants and duty concessions follow state rules. Check each one separately.
What should I check before I rely on a deposit bond?
Check the contract accepts a bond, and on what terms, before you rely on one. Then check these points:
- The seller or agent has agreed in writing, and the contract allows it.
- The bond amount matches the deposit stated in the contract.
- The expiry date is later than your settlement date, with room for delay, and you know the replacement rule.
- You have the issuer's written quote with every fee.
- You can fund the whole balance plus costs at settlement.
- You understand the indemnity you are signing.
A conveyancer can read the contract and special conditions before you commit. Find a conveyancer to check the contract accepts a bond, and on what terms, before you rely on one. This is general information, not personal advice.
Frequently asked questions
What is a deposit bond?
A deposit bond is an insurer's written promise to pay the seller your contract deposit if you default. It replaces the cash deposit at exchange. It is not a loan, and you still fund the full price at settlement.
How much does a deposit bond cost?
1.5% of the deposit amount is ENAYBL's published fee for a term up to 6 months, and its longer term guide is around 3% a year, paid upfront. Deposit Bond Australia publishes conflicting schedules, so get a written quote. Deposit Power quotes each case.
Is the deposit bond fee refundable?
It depends on the issuer. Deposit Power considers unused bond refund requests received within 30 days, deducting $290 for short term or $700 for long term bonds. ENAYBL requires the unused original bond returned within 30 days and may deduct up to $250. Refunds after settlement are limited to long term bonds, are at the insurer's discretion, and ENAYBL excludes bonds where the property is sold before settlement.
Can a seller refuse a deposit bond?
Yes. Acceptance depends on the contract and the seller's agreement, and it differs by state. The 2026 NSW standard contract sample operates only if the vendor accepts a bond. Check your own contract with your conveyancer before you rely on one.
Can a first home buyer use a deposit bond?
First home buyers can apply, but eligibility depends on the issuer and term. ENAYBL's published short term guidelines include an acceptable guarantor's property equity for first home buyers; its long term guidelines require existing property equity. Funds or loan approval alone do not establish eligibility. Ask the issuer which documents it needs.
Can I use a deposit bond at auction?
Sometimes. Queensland Government guidance says a bond is usually okay for the deposit, but you should ask the agent how the deposit must be paid before you bid. Before bidding, get written acceptance and confirm that approval, issue and delivery arrangements meet the contract's deposit deadline.
What happens if my deposit bond expires before settlement?
In the NSW 2026 sample, if completion has not occurred 14 days before expiry, a replacement must be served at least 7 days before expiry. Your contract and special conditions may differ, and the deadline can fall before the bond expires.
Do I still need the full purchase price at settlement?
Yes, less any cash deposit you already paid. A bond does not fund any part of the purchase. Deposit Bond Australia says that where no cash deposit was paid, you must pay 100% of the agreed price plus acquisition costs. The bond fee is an extra cost.
How we checked: we checked the linked primary sources on 28 October 2026 and calculated the labelled examples from the stated inputs.
Sources
- Deposit Power, Deposit bonds home page. No page date shown. Copyright 2025.
- Deposit Power, Frequently asked questions. No page date shown. Copyright 2025.
- Deposit Power, Deposit Power acquires Deposit Assure. 9 April 2026.
- Deposit Bond Australia, Product information. No page date shown; metadata published 12 July 2018, modified 14 February 2020.
- Deposit Bond Australia, Common usage of deposit bonds. No page date shown; metadata published 29 April 2020, modified 21 July 2022.
- ENAYBL Deposit Solutions, Frequently asked questions. No page date shown; QBE rating note dated 15 March 2025.
- Queensland Government, Buying at auction. Last updated 14 October 2024.
- Law Society of NSW, Contract for the sale and purchase of land, 2026 edition sample. 2026 edition.
- Commonwealth Bank, Bank guarantee. Information dated 10 June 2025.
- Australian Government, Australian Government 5% Deposit Scheme. No page date shown.
