Bank Guarantee / Deposit

The key points at a glance

When you buy a home and sign a purchase agreement, you are usually asked to provide a deposit (waarborgsom). The deposit is a guarantee for the seller: if the buyer does not fulfill their obligations, the seller receives compensation. The deposit amounts to 10% of the purchase price. Not everyone can pay this sum in one go. You can ask your bank or mortgage provider to act as guarantor for the deposit; this is called a bankgarantie (bank guarantee). On this page you can read exactly what a bank guarantee involves, what it costs, and what the conditions are.

1. What is a bank guarantee?

With a bank guarantee, the bank or mortgage provider stands surety for the deposit included in the purchase agreement. The deposit is an amount, usually 10% of the purchase price, that ensures the seller receives compensation if the buyer does not meet their obligations. The deposit is transferred to the notary, who holds it in escrow. If the buyer pulls out of the purchase at the last moment, the 10% of the purchase price is transferred to the seller. If the purchase does go ahead, the 10% is deducted from the total purchase price.

If you cannot pay the deposit yourself, the bank can stand surety for it. This means that if you as the buyer do not proceed with the final purchase, the bank pays the 10% deposit to the seller. You then have a debt to the bank.

2. Bank guarantee from the mortgage provider

In most cases you can arrange a bank guarantee through your mortgage provider. You can, for example, ask the provider to stand surety for 10% of the purchase price. If the purchase falls through after the dissolving conditions (ontbindende voorwaarden) in the purchase agreement have expired, the provider will still transfer 10% of the purchase price to the selling party, which gives them a form of compensation for their time. Bear in mind that if you back out of the purchase, you have a debt to the bank equal to the bank guarantee amount. Before making an offer it is wise to calculate how much you can borrow, so you know which purchase price is within reach.

3. Dissolving conditions

Dissolving conditions are included in the purchase agreement so that, if the conditions are met, you can cancel the contract free of charge and the bank does not owe the seller the deposit. After signing the purchase agreement you have three days to reconsider, but circumstances can arise after that period that mean you no longer want to proceed with the purchase. That is what the dissolving conditions are for. Examples of dissolving conditions include:

• Being unable to secure financing for the property. This often comes with an obligation to make reasonable efforts, meaning you must demonstrate that you genuinely tried to obtain a loan, for example by providing rejection letters from mortgage providers.
• If the property is seriously damaged in the period between signing the purchase agreement and the deed of transfer, for example by fire or extreme weather, it is often possible to cancel the contract.
• Sometimes you are required to apply for a residential permit from the municipality. If that application is rejected, it is often possible to cancel the purchase agreement.
• You can also include the condition that your own home must be sold within a certain period. This protects you from carrying double costs if you cannot sell your current property.

In principle, the purchase agreement is binding and can only be cancelled if you meet the conditions listed under the dissolving conditions. It is also your own responsibility to invoke the dissolving conditions when they apply.

4. Cost of the bank guarantee

If you want the mortgage provider to issue a bank guarantee, in many cases you will need to provide a counter-guarantee yourself. The provider will require your assurance that you can repay the amount if it is paid out to the seller. You can agree on a counter-guarantee with the provider declaring that you will repay the amount if the provider pays the selling party based on the bank guarantee. The provider may also charge a fee for providing the guarantee. In most cases this is around 1% of the deposit amount.

5. Bank guarantee for a new-build home

The bank guarantee is also used when buying a new-build home, where the property still has to be completed and handed over. In the case of a new-build, the contractor still needs to deliver the home, and there may be defects present. You can hold back part of the purchase amount as a bank guarantee, meaning that portion is only released once all outstanding completion points have been resolved. In this respect, the bank guarantee provides a form of security and protection for both the buyer and the seller.

Frequently asked questions

What is a bank guarantee?

With a bank guarantee, the mortgage provider guarantees that the deposit will be paid to the seller if the buyer does not proceed with the purchase.

Who pays the bank guarantee?

It is an arrangement you make with the mortgage provider, but ultimately it is a debt you have to repay to the bank yourself.

How much is the bank guarantee?

The bank guarantee is usually 10% of the purchase price, and the provider typically charges a 1% fee for providing the guarantee.

When do I pay the bank guarantee amount?

You pay this amount if you back out of the purchase more than three days after signing the purchase agreement and you do not meet the dissolving conditions.

What are dissolving conditions?

These are conditions under which you can cancel the purchase agreement free of charge, such as being unable to secure financing or damage to the property.

What do I need to do to get a bank guarantee?

You usually need to provide a counter-guarantee to the bank, giving them assurance that you will repay the amount if you cancel the purchase agreement.

What is the bank guarantee for a new-build home?

If the contractor still needs to complete the new-build, you can hold back the bank guarantee amount from the purchase payment until all completion points have been resolved.

Expert mortgage advice

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