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Why do I need an irrevocable promise of payment?
Process and requirements for the financing of property.
Anyone wishing to purchase a property will almost invariably need to take out a mortgage – apart from the rare cases where the buyer has all the capital needed. Generally speaking, the borrower comes up with a deposit of at least 20% and may borrow up to 80% of the value of the property from a mortgage provider. So the property is largely paid for with money from a third party, who attaches conditions to their payment: ordinarily, the institution needs to have received in full any own funds (of the borrower’s) being used, the contract of sale needs to have been signed, and the mortgage certificate needs to have been issued for the necessary amount. A property purchase is a transaction of extraordinary importance in financial terms – so every detail has to be right. This is why the contract of sale needs to be certified by a notary. And they in turn must have all the necessary documentation to allow them to declare the transaction to be legally valid with 100% certainty. Ultimately, the purchase is sealed with the entry in the land register.
Irrevocable promise of payment as a decisive guarantee.
Buyers are faced with a challenge: they would like to purchase a property, but with most of the purchase price to be financed with money from a third party. They in turn will only provide the money needed, in the form of a mortgage, if the property buyer meets their conditions. One of these conditions includes the signed contract of sale, which can only be certified by a notary once the purchase price has been paid in full. The solution to this complicated triangular relationship is the irrevocable promise of payment from the financing partner, by which they provide a legally binding undertaking to pay the mortgage amount – which in turn provides the notary with the necessary guarantee that the purchase transaction can be declared valid. Normally, the promise of payment from a financing partner is subject to certain conditions, which have to be met before the purchase transaction is finally concluded. Conditions such as certification of the contract of sale and issuing of the mortgage certificate can be dealt with during the visit to the notary. By contrast, conditions relating to the receipt of pension money drawn early are more problematic. Here, time may often be short and the process involved may be complex – so prospective buyers should deal with any early withdrawal of pension funds without delay and start taking the necessary steps.
