Exchange Bond is a financial guarantee provided by Exchange Insurance to a seller on behalf of the buyer. It removes the problem of a buyer having to hand over cash on exchange and then waiting several months for the sale to be completed. The financial guarantee is normally issued for a period of between three months and for up to four years.
The buyer will pay a small premium for the Exchange Bond. For example, someone buying a property costing £200,000, and wanting an Exchange Bond in place of a 10 per cent deposit to cover a six month gap between exchange and completion, would pay a premium of £850.
On completion, the buyer pays 100 per cent of the agreed purchase price. For many, this provides the time to save the full deposit amount required. There is no risk to the seller or developer as there is a guaranteed pay out seven days from receiving a valid claim if the buyer defaults at completion.
Subject to certain conditions, the product can also be used to purchase property abroad.
Commenting, Frank Speight, sales and marketing director at ExCo, said: “The Exchange Bond is a very attractive alternative to making a cash payment on exchange when buying a property. First-time buyers, residential property investors and existing owners trading up to a larger property can all benefit from using the Exchange Bond.”
Cath Hearnden, director at My Mortgage Direct, welcomed the introduction of the Exchange Bond. She said: “Years ago, there was a product called a deposit guarantee which worked in the same way and that was a very useful tool. This new development is most definitely welcome, particularly for new-builds and first-time buyers, where saving for a deposit may be a struggle.”
