Deposit finance for investment and commercial property purchases

The deposit is the first real money in any property purchase, and it is often the hardest to find on time. Your purchase loan, whether from a bank or anyone else, is normally drawn at settlement. The deposit falls due weeks earlier, at exchange, and the vendor wants it in cleared funds. If your wealth sits in other buildings rather than the bank account, there is a gap.

This page is about that gap for business owners and investors. It explains when deposits are due, what happens to them, the honest risks of borrowing one, and how a short caveat loan or second mortgage over property you already hold can pay it.

When is a deposit due, and how much is it?

The contract decides. Common patterns:

• At exchange. The NSW Government notes that the deposit is payable when contracts are exchanged, and that residential buyers then have a five business day cooling-off period.
• Within a few days of signing. Queensland’s guidance says buyers normally pay the deposit within two to three days of the contract becoming binding. A buyer may also be asked for a partial deposit with an offer, which is refunded if the offer is rejected.
• Split deposits. A small initial deposit at signing and the balance a few days later or when cooling-off ends.
• At auction. Paid on the day, immediately after the hammer falls.

A tenth of the price is common, but the figure is negotiable, particularly off-market or when the vendor values a quick settlement. Settle the amount and the dates before you seek funding.

How does deposit finance work?

1. Confirm the deposit, the due date and the settlement date with the agent or vendor’s solicitor.
2. Enquire with the details of the property you own. What it is worth in your estimate, what is owing on it, and how the purchase will be funded at settlement.
3. Receive terms and a Letter of Offer. For a deposit, this is usually a caveat loan or a second mortgage.
4. Sign and settle the deposit loan. Every owner of the security property signs.
5. Pay the deposit into the trust account the contract names.
6. At settlement, repay. The main purchase loan pays out the deposit loan, or it runs on briefly until another property sells.

Because the loan is secured on real estate you already own, it can usually be arranged faster than a bank purchase loan. For deposit-sized amounts between $20k and $250k, same-day funding can be possible once documents are in.

Which structure fits a deposit?

Situation	Structure	Why
Property you own has a bank loan you want to keep	Caveat loan	Quick; no need to touch the bank loan; can later become a registered second mortgage
Longer gap until repayment, or larger deposit	Registered second mortgage	Firmer position for a longer term
Property you own is debt-free	Private first mortgage	Strongest security, generally the keenest pricing
Deposit and balance both needed privately	Deposit loan now, first mortgage over the purchase at settlement	One lender, rolled together at settlement

A caveat or second mortgage ranks behind your existing lender and so generally costs more than a first mortgage. A lender can only lodge a caveat where it holds a caveatable interest, which the loan documents create. Developers buying a site rather than a completed property should read site deposit funding, which covers options, DA conditions and longer settlements.

How do the deposit options compare?

Option	What it is	Best when	Watch for
Cash from the business	Your own funds	Working capital is genuinely spare	Starving the business of cash it needs
Deposit bond	A guarantee paid to the vendor if you default	Vendor accepts bonds and you qualify in time	Some vendors insist on cash; it does not fund the balance
Bank equity release	Top-up or new loan against your property	Bank can approve before exchange	Often weeks; approval not certain
Private deposit loan	Caveat loan or second mortgage	Time is short or bank can’t move	Short term; higher cost than a bank
Asking for a smaller deposit	Negotiating the contract	Vendor values speed or certainty	Not always accepted

Our small secured business loans page explains why deposit-sized caveat loans can move so quickly.

What happens to the deposit after you pay it?

Usually it sits in a trust account held by the agent or a solicitor or conveyancer until settlement, then goes to the vendor. Some contracts allow early release to the vendor, so read that clause.

What matters for a deposit loan is the downside. If the buyer fails to settle, the contract typically lets the vendor keep the deposit and claim further losses. You would then owe the deposit loan with nothing to show for it. That is the single biggest reason to borrow a deposit only when the settlement funding is realistic. If your settlement funding is a bank, ask for formal approval, not just an indication. If it’s a sale of another property, see bridging until a property sells for how to plan around a sale.

Cooling-off also matters. In NSW, a residential buyer who withdraws during cooling-off pays the vendor $250 for every $100,000 of the price, according to the NSW Government. Commercial contracts often have no cooling-off at all.

Who does deposit finance suit?

It suits:

• investors buying their next property while equity sits in their current portfolio;
• business owners buying premises, with the business’s cash committed to stock and wages;
• buyers at auction or off-market who must pay on the day;
• buyers whose settlement funding is confirmed but drawn only at settlement.

It doesn’t suit:

• buyers without settlement funding in place;
• buyers who would need every dollar of equity to cover the deposit alone;
• anyone buying a home to live in, which is outside what we fund.

When is borrowing a deposit the wrong move?

• The vendor accepts a deposit bond and you qualify. That’s usually cheaper for a pure deposit.
• Settlement funding is uncertain. If the bank hasn’t formally approved, or the sale you rely on hasn’t exchanged, a deposit loan adds a second loss to a failed purchase.
• The settlement date is far away. A long gap means more interest on the deposit loan. A smaller initial deposit or a longer-dated bond may suit better.
• You can negotiate a smaller deposit. Ask before you borrow.

What it costs (without the guesswork)

Each deposit loan is priced on its security, LVR, term and exit, with the aim of the sharpest price your circumstances support. The parts are:

• interest for the period until repayment, which can be prepaid or capitalised so nothing is due monthly;
• an assessment fee, set per loan and printed on the Letter of Offer;
• legal and caveat or mortgage registration costs, and discharge costs when repaid.

The property is assessed directly, with no formal valuation required, which is part of why a deposit loan can be ready on exchange day.

Illustrative example: a deposit for a commercial unit in Adelaide

Illustrative: an Adelaide electrical contractor agrees to buy a commercial unit for $860k. The vendor wants a cash deposit of $86k at exchange in four days, with settlement in 60 days. The contractor’s bank has formally approved the purchase loan, drawn at settlement, but its cash is committed to a large job. The contractor’s home is worth about $950k with $420k owing. At an illustrative 70% LVR band the home supports total secured debt of about $665k, leaving room of about $245k behind the bank.

Item	Amount
Caveat loan over the home	$95,000
Less illustrative interest allowance to settlement plus a buffer	$(4,500)
Less assessment fee, legal and caveat costs	$(4,500)
Deposit paid into the agent’s trust account	$(86,000)

At settlement, the bank’s loan funds the balance of the price, and the contractor adds proceeds from the completed job to repay the caveat loan. If that payment is late, the caveat can be converted to a registered second mortgage while the contractor waits.

The numbers are round and illustrative only.

Key terms for deposit buyers

• Exchange: the moment both parties hold a copy of the contract signed by the other, which is when the deposit usually falls due and the contract binds.
• Initial and balance deposit: a deposit paid in two parts, often a small sum at signing and the remainder a few days later.
• Trust account: the agent’s, solicitor’s or conveyancer’s account that holds the deposit until settlement.
• Deposit bond: a guarantee from an issuer that pays the vendor if the buyer defaults; it stands in for cash but is not cash.
• Settlement funding: the loan or sale proceeds that pay the balance of the price, and usually the deposit loan too.
• Forfeiture: the vendor keeping the deposit after a buyer fails to complete, under the contract’s default clause.

Documents you’ll need

• The contract or the agent’s summary of terms, showing the deposit and due date
• Evidence of settlement funding: a bank’s formal approval, a sale contract for another property, or a private loan offer
• Photo ID for every borrower, director and security owner
• Title details and the current loan statement for the property you’re offering
• Company or trust details if an entity is buying

How fast can a deposit be funded?

Deposit-sized amounts of $20k to $250k can be possible the same day when everything is in, and larger sums up to $5m can be possible in 24–48 hours. The usual delay is a signature from a co-owner who is travelling, so line up every owner of the security property before exchange day. For purchases settling in a hurry, see settling a property purchase on time. South Australian buyers can read about private lending in Adelaide. The equity calculator gives a quick estimate of headroom before you enquire.

Exchanging soon? Give us the deposit, the date and the property you own and we’ll confirm what can be ready in time.

Need the deposit before the equity comes free? See if you qualify

Checking costs nothing and does not involve a credit check. Your enquiry stays with one direct lender rather than being pushed out to many, and a specialist, not a bot, works through it. Our lending partner fundU assesses the property directly.

Tell us the deposit amount and due date, how settlement will be funded, and exactly what is owed on the property you’re offering. With those facts right, the answer you get back is one you can act on. Start your deposit enquiry.