Here's some general pointers from the Irish Financial Services Regulatory Authority:
Press Release
29 July 2004
Consider Your Options Before Refinancing Debts into Your Mortgage
The Financial Services Regulator is urging consumers to carefully consider the long-term effects of consolidating personal debt into existing mortgages. Refinancing, where people pay off personal debt by adding these debts into their main mortgage, can reduce monthly repayments, but may cost considerably more in the long term.
The Financial Services Regulator's [broken link removed]
outlines the factors consumers should consider before refinancing.
It illustrates that rolling €28,000 of short-term loans into an existing mortgage would end up costing the consumer €8,684 over a 20-year mortgage. Almost three times the original cost of the loans.
Consumer Director, Mary O'Dea, said, "While refinancing can reduce your overall monthly repayments, the long-term cost of your loans could increase dramatically, especially if short-term loans are extended for the full term of the mortgage. While interest rates are low at the moment, you should consider the impact that an interest rate rise could have if you refinanced
a considerable amount of personal debt into your mortgage".
"Lower interest rates, lower repayments and the flexibility of paying off short-term loans over a longer term are attractive prospects. However, there are also pitfalls, as you could come to rely on refinancing as a means of getting out of debt, without addressing the underlying problem. While many people have considerable equity in their homes, which may make refinancing
attractive, it is important to remember that all refinancing loans are secured on the residence. Therefore, if you cannot keep up repayments due to a change in your circumstances, your home could be at risk"
She added, "One of the main things to remember about loans of any sort is that the term should suit the purpose. If you opt for refinancing over the full term of your mortgage, you could still be repaying a car loan in 17 years time from now, long after you have stopped using the car. So, if you are refinancing, you may wish to repay different amounts over different terms, so that you can avail of lower interest rates while not allowing your short term debt to extend long into the future. Ask your lender about this."
Refinancing Do's and Don'ts
Do
        *        Do choose a loan term suitable for the purpose of the debt.
        *        Do pay extra each month if you can, as you will save interest and get the loan paid off earlier.
        *        Do work out the total cost of credit.
Don't:
        *        Don't be tempted to extend debts too far into the future. Do
you really want to be repaying last year's holiday in 20 years time?
        *        Don't let the low monthly repayments tempt you to borrow
more than you really need.