A remortgage is a typically a process which allows a borrower to effectively switch their current mortgage to a new deal and, more often than not, a new lender.
Remortgages usually occur when a borrower is customers looking to get a better deal on their existing mortgage. For instance, their fixed or introductory rate may have ended or their current lender may have increased their APR. By taking a remortgage in this instance, a lender can move to a cheaper mortgage deal, significantly reducing their monthly outgoings.
A remortgage can also be used as a means of securing a cash lump sum against the equity in a property, very much like a secured loan, which could then be used for the purposes of debt consolidation.
Like a consolidation loan, you can use the capital raised to pay-off all of your existing debts, reducing your separate monthly outgoings.
The biggest advantage of a remortgage over a consolidation loan is that the interest rate that you are likely to pay will be considerably cheaper than that offered by a typical secured or unsecured consolidation loan. Whilst the APR on a typical secured loan is set almost entirely by the lender, mortgage rates tend to be considerably lower, based upon the Bank of England base rate.
Of course, much of why mortgage interest rates tend to be lower than other forms of borrowing is due to the level of security that a lender has. Your home may be repossessed if you fail to keep up repayments on a mortgage or loan that is secured on it and so you should always think carefully before you secure additional debt against your property.
You will also only be able to secure a remortgage to consolidate your debt if you have sufficient equity in your home.
Equity is essentially the difference between the amount that your property is worth in the current market and the amount of finance that is secured against it. If your property is worth more than the amount of credit currently outstanding, then you have equity which could be used to secure a additional finance. On the other hand, if your property has fallen in value to the point that it is worth less than the size of the mortgage secured to it, then you have negative equity and it is unlikely that you will be able to secure a remortgage.