Re-mortgaging a home used to be associated with financial problems or even bankruptcy, but this is no longer the case. To re-mortgage a home simply means switching an existing mortgage, usually to a new mortgage lender, to capture a better deal or lower interest rates. In fact, this practice has become very popular in the UK.
As people become more financially savvy and information from the financial markets and mortgage lenders become more easily accessible, it makes sense as a borrower to shop around and stay up to date on offerings by lenders. Re-mortgaging can save a lot of money, if done properly. For example, if your current mortgage is a standard variable rate mortgage, it is highly likely that by switching mortgage types, you could enjoy lower interest rates, if market rates have declined since you took out your initial mortgage.
Another reason to re-mortgage an existing property is accessing a home’s positive equity. With home prices rising all over the UK, homeowners are experiencing high levels of positive equity. Equity is the property value, less the outstanding mortgage. Thus, a positive equity means an increase in the value of the property. This positive equity can be released by re-mortgaging and used in turn for home improvements, a new car, a holiday or anything else one might usually get a personal loan for. In these cases, it makes sense to re-mortgage, because the interest rates are very low compared with many personal loans and credit card rates.
Another common reason for a re-mortgage might be to consolidate all debts into one payment, secured on a property. Or, one might want to make home improvements, such as adding a conservatory or a garage and instead of taking out another loan; you could add the cost to the current mortgage, making just one monthly repayment.
Re-mortgaging doesn't always mean switching lenders. It is possible that the existing lender may offer a more attractive mortgage deal, in order not to loose a client. This is still re-mortgaging, and it may become more common in the future, as lenders realise that consumers are getting savvier and are changing their ways in order to realise savings in the mortgage deals.