Security Deposit and Bank Guarantee
The 10% you must put behind your promise to buy: how the deposit works, when a bank guarantee is cheaper, the deadline that catches people out, and what happens if the sale falls through.
A Dutch purchase agreement is binding, and it is backed by money. Within a few weeks of signing you must give the seller security worth 10% of the purchase price, held by the notary. On a €400,000 house that is €40,000 — and for many first-time buyers it is the largest single obstacle between the offer being accepted and the keys being handed over.
The security is not a payment towards the house in any sense you can spend. It is a guarantee that you will complete, and a fund the seller can claim against if you do not.
Why it exists
Once the statutory cooling-off period has passed, you are committed. If you then walk away without a valid contractual ground, the seller can claim the penalty in the agreement — typically 10% of the purchase price. The deposit is what makes that claim collectable rather than theoretical.
It cuts both ways. Because you have posted real money, sellers can take your offer seriously without needing to know anything else about your finances.
The deadline is in your contract, and it is real
The agreement names a date, commonly around six weeks after signing and always before the transfer. Miss it and you are in default — the seller can formally give you notice and, if you still do not deliver, pursue the penalty.
Two things follow. First, read the date the day you sign, not the week it falls due. Second, if you are using a bank guarantee, start early: your lender cannot issue one before your mortgage is formally approved, and that approval has its own timetable. The gap between "my adviser says it looks fine" and a binding offer is where this deadline gets missed.
Your two options
| Cash deposit (waarborgsom) | Bank guarantee (bankgarantie) | |
|---|---|---|
| What you provide | 10% transferred to the notary's client account | A written undertaking from your bank or insurer to pay the 10% if you default |
| Cost | Nothing, but the money is locked up | Around 1% of the guarantee sum — roughly €400 on €40,000 |
| Needs savings | Yes — the full 10% in cash | No |
| Needs mortgage approval | No | Yes, in practice |
| Best when | You hold the cash and would earn little on it meanwhile | Your equity is tied up, or you are between two houses |
Neither option is better. The question is only whether you would rather part with €40,000 for a couple of months or pay around €400 not to.
What a bank guarantee actually is
Your lender promises the seller that if you fail to complete, the bank will pay the 10% on your behalf — and then recovers it from you. You are not insured against your own default; you have bought a delay, not protection.
Most Dutch mortgage providers issue guarantees as part of the mortgage. Specialist insurers also offer them, which matters if you are buying without a mortgage or are self-employed and your lender is slow. The fee is usually a single charge rather than an annual one, but confirm that when you apply.
The financing clause is what actually protects you
The deposit is the seller's protection. Yours is the financing condition (financieringsvoorbehoud) in the purchase agreement, which lets you dissolve the contract without penalty if your mortgage does not come through by a stated date.
This is the clause competitive buyers are pressured into dropping, and it is by far the most expensive thing to give up: waive it and a rejected mortgage application no longer releases you — it makes you liable for the 10%. If you keep it, note that dissolving usually requires written evidence of rejection within the deadline, so start collecting it the moment things look uncertain.
In an apartment purchase, watch the deadline for reviewing the VvE documents too. Both conditions expire quietly.
When it is released
The notary holds the deposit or the guarantee until completion. On the day of transfer, a cash deposit is set off against the purchase price on the settlement statement, so you simply transfer the remainder. A guarantee is cancelled once the notary confirms the transfer has gone through — check that this actually happened, because a guarantee that is never formally released can linger against your borrowing position.
If the sale is lawfully dissolved — the financing clause is invoked in time, or you withdraw within the statutory cooling-off period — the deposit is returned and the guarantee lapses. You do not lose it merely because the purchase failed; you lose it because it failed for a reason the contract did not allow.
Budgeting for it
The 10% is separate from your down payment and from the buyer's costs. A Dutch mortgage can only cover 100% of the home's value, so the purchase costs come out of savings regardless — see the breakdown of closing costs and put the figures into the mortgage calculator to see what is left afterwards.
If the cash for a deposit is the binding constraint, the guarantee is usually the right answer, and €400 is a modest price for keeping your savings liquid through the most expensive month of the process.