Re-mortgages are in many ways identical to a mortgage. It involves you presenting your financial situation, your need, and the collateral (your property) to a lender. Borrowers must convey a strong case for why their loan is a good risk for the lender. But unlike mortgages, where almost always the sole reason for the loan is to enable you to purchase a home, the reasons for taking a re-mortgage are quite varied.
The main reason why one takes up a re-mortgage derives from a scenario of falling interest rates across the lending industry to save money. It is also a way to raise cash funds quickly within a short period of time. They are some who use re-mortgage for home improvements, to build more equity to their existing property or use it as a debt consolidation option.
Re-mortgages come in a variety of arrangements and structures. The most common is a Standard Variable Rate (SVR). A Standard Variable Rate is a re-mortgage where the interest floats upon the market rate. Even under this variable rate, however, the first few months are typically fixed below market to entice you to take on the loan.
The other major type of re-mortgage is a Fixed Rate Mortgage. Fixed Rate Mortgages differ from SVRs insofar as the interest rate is determined and remains flat from the beginning. This type of loan is more dependable, insofar as you know exactly what your payments will be from start to finish, but it is more risky in that you may end up paying too much if rates fall (or too little if they rise). As a result of this increased risk, banks typically charge a slightly higher rate for fixed rate re-mortgages.
There are also a wide variety of intermediary re-mortgaging options. Lending options like capped rate, tracker, and droplock loans are all variations on re-mortgages which blend some aspects of variable rate and fixed rate mortgages.