Deposit Bonds



From: Coretta Williams

I am currently purchasing 3 apartments off the plan (due for settlement in December 2001) for a total of $800,000. I am securing these at a $20,000 (8%) discount each and would like to use deposit bonds instead of cash (which I have if needed). I have approached several lenders who are all agents of Royal Sun Alliance although they all state I need to go through the entire loan approval process. As I don't want these purchases to show on my CRA as a liability until late next year, it is not my preference. Does anyone know of any lenders who sell deposit bonds without the full loan approval? Would appreciate any leads at all.
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Your Credit File

Reply: 1
From: Land Holdings


I've just received my 'Individual Credit Report'. It was free from:

I would highly recommend this for anyone who has taken out multiple loans.

Someone (from this forum - thanks!) gave me a good tip which is to NEVER sign anything that allows lenders (banks, non-banks) to access your credit file until you're pretty dead-set sure that they'll approve the deal.

If they are too keen for you to sign then LOOK OUT and quickly walk away. (I've had this experience a couple of times, even wanting me to sign a half filled in loan document - will not name names.)

Question for brokers and others: What do lenders look for when they access your credit file? What looks bad (besides the obvious like bankruptcy) and what looks good?

I've had mine mailed to me and it's very interesting. It's like your life history in credit. Some of the entries I cannot ever recall having given authority to access.

Hope this is of some help to other investors.

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Reply: 2
From: Rolf Latham

Hi Coretta

Most bond issuers will want to make sure you can complete the deal.

In recent times, some people have used the one loan approval to obtain up to 6 bonds on six separate properties. Obviously this situation is concerning to a bond issuer. While this may work for the buyer in a rising market the bond issuer is concerned that the borrower may not be able to complete the deal. Outcome:

Bond Issuer pays developer 10 % and chases borrower for the 10 % + costs. So unless one can show that one can complete the deal via a finance approval bond issuer generally doesnt not want to come to party.

It is NOT neccesary to overly protect your CRAA rating where your broker carries a careful explanation for each entry. It is lots of unexplained entries for various sums of money with diff instituions that causes the grief, not the entries themselves. In your case this is especially so if you are getting settlement finance for the deal from the same people tha initially gave you approval.


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Reply: 3
From: John Reischel

Hi Coretta,

Have you considered Bank Guarantees instead of Deposit bonds ?.

Whilst essentially the same instrument as issued by insurance companies Bank Guarantees are are issued by the bank, however, the Bank will only require evidence that you can cover the amount of the guarantee, their liability, not the full amount required for settlement, your liability.

Of course you still have over zealous finance sales people who will try to sign you up for finance.

You will also find that the counter staff at many Banks don't know they sell the product. The best bet is to be persistent and ask to contact a business banker with over $1M authority or try the second level banks.

Good luck.

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