Deposit Bonds and Bank Guarantees

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From: Debra L


I have a couple of questions in relation to Deposit Bonds and Bank Guarantees.

Firstly, I have been told that with Deposit Bonds you require a ratio of 5:1 of Equity to the amount being secured, and with a Bank Guarantee it is a 1:1 ratio.

If you are getting a Deposit Bond or Bank Guarantee, using your existing PPOR as security and your PPOR is worth $300K with a $150K loan ($150K equity) can you secure deposit bonds/bank guarantees against the full $150K or only a percentage of your equity (80 or 90%)?

Secondly if you are getting a bank guarantee, do you have to get it through the bank that your current loan is through, or can you get one from another bank, and just secure it against your property?

Thank you in advance for your responses.

Debra
 
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Reply: 1
From: Donna L


Just be careful to read the fine print with
the bank guarantee (unlike yours truly
who will now shoot herself in the other
foot). I got a bank guarantee 6 mths ago
for an OTP. As they held mortgages over
everything I owned I wasn't too fussed
whether they had mortgaged more of my
collateral. I have recently refinanced and
had to rustle up a deposit bond very
quickly as the bank I was leaving and
taking most of my property away from
decided they did not want to extend the
guarantee any longer. Settlement fell
over then because there was a wrong
date on the deposit bond and bits of
paper were flying everywhere. Banks will
generally want some collateral (i.e.
mortgage, term deposit etc though not all
so 1:1 is OK) Deposit bond needs to see
you have 5:1 equity but they do not take a
charge over it which, depending on your
situation, may be a better deal. As to the
comparative costs that depends on the
length of time you need the bond or
guarantee.


Donna L
 
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