A guarantee is a piece of paper from the bank that basically says, "we guarantee to give you this money for you to buy a property".
Now, let's say you're buying a property for a million Rand. You've put down R100 000, the bank is giving you the other R900 000.
That is going to be signed with a guarantee that says, "we're going to give you R900 000". However, that is signed early on in the transfer process. So quite early on the bank gives you a guarantee. Then about two months later is when you actually get ownership. However, the bank will only give you the money at the end even though they signed for it at the beginning.
Well, what does that mean for you? Can they retract the guarantee?
The answer, unfortunately, is... yes they can.
I'll explain why.
Early on, the bank looks at you and says, "we can give you R900 000 because your credit rating looks good, everything looks right with your spending, etc". If you now think to yourself, "I have money now!" and take a new car payment, get a credit account from a store or you spend on your credit card...
Your credit position will be different than when the bank first looked at it.
Just before they give you the money, that R900 000, they're going to look at your credit rating one more time. If it's changed significantly, they're going to say, "this isn't the same guy or the same girl that we reviewed two months ago, we're not giving you the R900 000, your credit is not right anymore. We don't trust that you're actually going to repay us".
That's when they can take away the guarantee and the purchase of your new property can completely fall through because you don't have money from the bank.
So yes, they can.
What can you do about it?
When you sign the guarantee. When you get that money from the bank early on, until the property is in your name and the bank has paid you out...
Do not change your credit position.
Don't go take out new loans.
Don't go buy a fancy new car.
Keep your position, your salary, everything about as good as or better than when you got the guarantee originally.
I hope that makes sense because it's something that people miss and deals fall through because of that. Keep your credit position the same. Get your money right in the process so the bank doesn't take away the guarantee. If you do, they'll give you the money and all will go according to plan.
If you need any help along that process with getting your money ahead of time, you can contact us at Empower Funding. We do bridging finance for agents and sellers and we will get you your money, now.
Gal Ezra,
Managing Director,
Empower Funding
021-140-3540