You usually have to deposit 10% of the purchase price in the notary's account as a guarantee when you buy a property. Instead of using your own money, you can secure this with a bank guarantee.
What is a bank guarantee?
With a bank guarantee, the bank states that it guarantees payment of the agreed deposit if you, the buyer, fail to fulfill your obligations. It is a form of financial security for both the buyer and the seller. The bank guarantee covers the seller's costs if the buyer fails to fulfill the agreements.
When signing the sale deed, it is uncommon to pay the purchase price immediately. This only happens when you visit the notary to sign the deed of sale. There is often time between signing the deed of sale and signing it at the notary. Therefore, in most cases, the seller requires you, the buyer, to pay a deposit or provide a bank guarantee after signing the deed of sale. This provides the seller with certainty you will buy the property.
A bank guarantee is often used for the deposit. This is useful if you do not have the money for the deposit or do not want to release it for this purpose. You take out a bank guarantee after receiving the binding mortgage offer.
The period for depositing the bank guarantee is described in the deed of sale. You usually secure the bank guarantee within two weeks.
Why do you need a bank guarantee?
A bank guarantee is important because it offers extra protection to both parties. It gives the seller certainty that all agreements will be fulfilled by the buyer, such as paying the buying price. It also offers the buyer security that the seller will fulfill the obligations in the purchase contract.
What does a bank guarantee cost?
Most banks charge 1% for the bank guarantee. So for a purchase price of €350,000, the amount guaranteed by the bank is €35,000. You then pay €350 for the cost of the bank guarantee.
Savings or bank guarantee?
If you have enough financial reserves, we advise you to use them. Your Walter Expert can help you with this. In most cases, the bank guarantee is higher than the interest you lose if you pay the deposit with your own money.
Bank guarantee in case you decide not to buy
If the purchase does not occur because you change your mind within three days of signing the deed of sale, you do not have to pay anything. However, if you decide not to buy within three days of signing the sales agreement, you won't have to pay anything. What if you cannot refer to the resolutive conditions? Then the seller will receive the 10% deposit.
If you have a bank guarantee, the bank will pay this amount. However, you now have a debt with the bank, which you must repay anyway. To avoid this, include resolutive conditions in the deed of sale. You set these when you made your offer.