Deposit Power, which is ultimately owned by Promina, formerly Royal & SunAlliance, started operating here last year, but that was just "a very soft launch," says general manager Steven Watters.
He says that is about to change.
Deposit Power is for people who for whatever reason can’t or don’t want to produce a cash deposit can pay Deposit Power a fee of 1.2% of the deposit and Deposit Power will guarantee the vendor that the transaction will be settled.
For example, a property costing $200,000 would normally require a $20,000 deposit. Deposit Power will provide its guarantee or bond for just $240. No interest charges are involved. In most cases, the guarantee lasts a maximum of six months.
"They are especially useful for people who are asset rich but cash poor or who have funds tied up in other investments." It can be useful for people who are selling one house and buying another where the settlement dates don’t match.
Watters says his company provides an alternative to bridging finance which he says costs well over double a guarantee.
It is also much faster to get a guarantee because all Deposit Power needs to verify is whether the purchaser has the financial capacity to pay for the house by the settlement date. Unlike mortgage providers, it doesn’t require full details of the person’s income and financial position, he says.
So far, Deposit Power has agreements with Westpac Bank and Auckland-based mortgage broking firm Mortgage People to distribute its guarantees. Watters says more such agreements are in the pipeline.
