When you are buying off the plan, you will usually be asked to make a deposit, generally 10 percent, so you will need to consider how you will get the money for that. Having a healthy deposit (more than 10 percent) will also open up more lending options for you as the risk is lower for lenders.

The deposit will be held in trust until final settlement takes place. This means your money is protected until the project is completed. If the project does not go ahead or finish as expected, you should be able to reclaim your deposit.

Alternative deposits

There are some alternatives to a cash deposit and they are a Deposit Bond or Bank Guarantee. You will need to discuss with the sales agent or developer if they will accept these forms of deposit.

Deposit Bond

A Deposit Bond is a form of guarantee offered in lieu of a cash deposit. The issuer of the Deposit Bond, like a bank or other lender, guarantees unconditional payment of the deposit bond amount to the Vendor in the event that the Buyer fails to settle/complete the Contract of Sale.

Bank Guarantee

A bank guarantee is basically just that…. a guarantee issued by a bank. Basically it’s a piece of paper with an official stamp on it, and it gives the holder the right to cash in the guarantee in certain circumstances. The approval process for a bank guarantee is pretty much the same as a loan approval process, and the bank will only issue a bank guarantee if they can actually guarantee that you’re good for the funds.

Basically if you’re approved for a bank guarantee you will exchange contracts with the bank guarantee as a deposit. On settlement you will be required to come up with the whole purchase price.

Get expert advice

If you are looking to get finance to buy an off the plan property make sure you understand how it works and what you can commit to. You should speak with your solicitor or legal adviser before entering any off the plan contract, or any property sales contract. Make sure you get someone qualified to check the contract before you sign.

Have you used a different way of paying a deposit?