Stamp duty, solicitors' fees, surveyors fees, valuation fees, time off work and essential repairs - first-time buyers quickly discover that there is a lot more expense involved in finding and buying a house than the price tag.
Even the mortgage brings a series of further costs with it. Before a financial institution grants a mortgage, it will insist on or strongly recommend a range of insurance add-ons, some of which are obligatory. Suddenly the bare minimum monthly repayment that was worked out optimistically a few months before starts to grow bigger and bigger. To begin with, house insurance and mortgage protection insurance are obligatory and critical illness cover or permanent health insurance may seem like a good idea to take out in the face of a 30-year loan.
As for rising interest rates, they are the stuff mortgage payers' nightmares are made of.
So the last thing first-time buyers need when they have stretched themselves to the limit is yet another cost imposed by the mortgage provider in the form of an indemnity bond.
An indemnity bond is a type of insurance that the mortgage provider requests to protect themselves from negative equity. In the event that the house is sold to repay the mortgage, an indemnity bond covers the institution for any possible shortfall between the value of the house and the remainder of the mortgage.
Not all financial institutions look for indemnity bonds from first-time buyers. Some take on the cost themselves.
On a £150,000 (€190,000) mortgage, an indemnity bond can cost up to £1,000. That can be enough to cause first-time buyers further stress and even hardship at the final hurdle.
Of the lenders that do charge customers for an indemnity bond, most do so for mortgages of 80 per cent or more, but some start at 75 per cent. The bond is based on 3 to 3.5 per cent of the loan amount above the cut-off point.
So a couple buying a house for £170,000 and borrowing 92 per cent of the value would be charged £663 up front for an indemnity bond. This is based on 3.25 per cent of the amount of the loan above 80 per cent, in this case £20,400. Depending on the institution, it could be higher.
So who are the mortgage providers that require an indemnity bond and are there ways that borrowers can avoid paying for it?
According to Mr Liam O'Connor, manager of residential finance with the Irish Mortgage Corporation, it is important to compare costs as well as rates when choosing a mortgage provider.
ICS, AIB, Ulster Bank and TSB are just a few examples of lenders that do not charge customers for indemnity bonds. First Active does not pass on the cost on the majority of its products.
Mr O'Connor's advice is that it is possible to get a competitive lending rate and avoid the cost of an indemnity bond. Some lenders can be flexible and will waive the cost of the bond if the customer is forceful enough.
Finally, if you really are strapped for cash and it is too late to take your business elsewhere, it is possible that the lender will allow you to add the cost of the bond to the mortgage. But bear in mind that with interest you will probably pay more than twice the cost of the bond over the life of the loan.
