Squirrel now provide Deposit Bonds
As of 1st May, Squirrel is now working with Deposit Power (a division of CBL Insurance) to offer deposit guarantee bonds into the NZ real estate market for first home buyers, residential home buyers and buyers with longer settlement dates, such as those buying off-plan.
A deposit bond is a bond or guarantee issued by Deposit Power (and guaranteed by CBL Insurance) and used instead of a cash deposit when buying property. The deposit bond guarantees the deposit through to settlement. It is particularly useful if your money is tied up elsewhere (Eg it’s in a Term Deposit or equity in your home).
If you don’t have cash readily available, a deposit guarantee bond may be cheaper than borrowing short term to cover the deposit. Many banks will charge an overdraft rate of interest (up to 15%) or at the very best a floating mortgage rate (up to 6.75%.) The cost of a deposit bond is a one-off upfront fee.
You might ask why not just use KiwiSaver? There are several reasons why using a Deposit Power Deposit Guarantee bond is advantageous. Firstly, if you need the money straight away KiwiSaver won’t work as it takes around 10 days to process. So, if you’re planning to go to auction you’ll need another solution. Secondly, taking out your KiwiSaver now stops it accumulating more cash which can really add up if you’re buying off plan and settlement is a year away.
Check out the downloadable PDF for how the numbers stack up at the end of this article. Lastly, KiwiSaver assumes you have all of your deposit available and don’t need to still save some of it. Where deposit bonds really come into play is when you’re buying off plan, meaning it’s unlikely that you’ll settle for a year or more.
We’ve added up the numbers and you could save thousands by utilizing a Deposit Power deposit guarantee bond, which is why we decided to offer these are part of our service. To get a deposit bond, you need to be approved for finance, be a NZ resident and be purchasing the property to live in yourself. There are certain situations where we can make exceptions but only on a case by case basis. If you’re already approved with another lender, we are still able to organize a deposit guarantee bond for you for less than 12 months. If the deposit bond is going to be for more than a year, we’ll need to have your mortgage approved through Squirrel. We’ve put all this information and more detail around the numbers, how it works for Real Estate Agents and other useful stuff into a handy advice sheet that you can view and print.
Deposit Power is the largest issuer of deposit bonds in Australia - CBL Insurance Ltd is the largest and oldest issuer of Credit Surety in New Zealand, established for over 40 years, and writing insurance in over 25 countries.