Equity Stripping


DEFINITION of 'Equity Stripping'

The process of reducing the overall equity in a property in order to avoid creditors. The theory behind equity stripping is simply that by reducing your interest in a given property, thereby reducing any equity, creditors will not go to great lengths to include the property in any claims.

BREAKING DOWN 'Equity Stripping'

Equity stripping is one of the simplest asset protection methods and can also be one of the most successful. By giving another party a claim against a property, owners can retain control over the cash flows and use of the asset while making the property unattractive to creditors attempting to administer some type of legal judgment. The most common forms of equity stripping are spousal stripping and home equity lines of credit (HELOC).

  1. Equity

    Equity is the value of an asset less the value of all liabilities ...
  2. Spousal Stripping

    An equity-stripping technique used to reduce the equity in a ...
  3. Home Equity Line Of Credit - HELOC

    A line of credit extended to a homeowner that uses the borrower's ...
  4. Home-Equity Loan

    A consumer loan secured by a second mortgage, allowing home owners ...
  5. Mortgage Equity Withdrawal

    The amount of equity that consumers withdraw from their homes ...
  6. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Home & Auto

    When (And When Not) To Refinance Your Mortgage

    There are both good and bad reasons to refinance. Learn more about both here.
  3. Options & Futures

    Home-Equity Loans: What You Need To Know

    We shed light on why consumers decide to use this form of debt and whether it is a good alternative.
  4. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  5. Home & Auto

    Equity Stripping Leaves Creditors Empty-Handed

    Add additional debt to your real estate assets to keep the creditors at bay.
  6. Home & Auto

    5 Luxurious Ways to Boost Your Home's Resale Value

    Not all renovations are created equal. Here are five that are most likely to make a property appreciate (and be appreciated by househunters).
  7. Home & Auto

    The Most Expensive Neighborhoods in Manhattan

    Understand why Manhattan has some of the priciest residential real estate in the world. Learn about the top four most expensive neighborhoods in Manhattan.
  8. Home & Auto

    The Most Expensive Neighborhoods in Los Angeles

    Understand the layout of the greater Los Angeles area and what is driving up home values. Learn about the top eight most expensive places to live in LA.
  9. Personal Finance

    Should You Renovate or Move?

    Besides cost, what factors should you consider in deciding whether to remodel your home or move? This tutorial guides you through the steps.
  10. Home & Auto

    4 Home Upgrades That Don’t Pay

    Many remodeling projects sound good in theory, but don’t recoup their costs when it’s time to sell the house.
  1. How do I calculate how much home equity I have?

    Even though it is normally assumed most people know their home equity, many are still confused about the topic. It is an ... Read Full Answer >>
  2. What are the typical requirements to qualify for closed end credit?

    Typical requirements for a consumer to qualify for closed-end credit include satisfactory income level and credit history, ... Read Full Answer >>
  3. What are some examples of financial markets and their roles?

    Some examples of financial markets and their roles include the stock market, the bond market and the real estate market. ... Read Full Answer >>
  4. What price-to-book ratio is considered average in the chemicals sector?

    You can use Microsoft Excel to calculate the loan-to-value ratio if you have the mortgage amount and appraised value of a ... Read Full Answer >>
  5. How does the loan-to-value ratio affect my mortgage payments?

    Several factors affect the mortgage rate you can obtain when you purchase a home. Lenders analyze credit histories and scores ... Read Full Answer >>
  6. What is the difference between a PMI (primary mortgage insurance) loan and a Federal ...

    Home buyers who are unable to contribute a traditional down payment of 20% may think home ownership is out of reach. However, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!