Stripper

AAA

DEFINITION of 'Stripper'

Slang for an individual homeowner who strips the equity out of his or her home through mortgage refinancing. The proceeds are generally not re-invested, but spent on consumer goods.

INVESTOPEDIA EXPLAINS 'Stripper'

Most people get rich by saving and investing wisely. Strippers, on the other hand, feel rich because they have increased their disposable income by going further into debt.

Strippers face two huge risks. First, they are trusting that the value of their home will keep rising, but any dip in the housing market will prevent future refinancings. Second, strippers usually borrow when interest rates are low. If they have a variable-rate mortgage and rates rise again (as they always do), they might not be able to afford the mortgage payment. Sooner or later, strippers will have to reduce their consumption and start saving to pay back loans. This situation is a vicious cycle because the deeper into debt a person goes, the harder it is to get back in the black.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Equity

    1. A stock or any other security representing an ownership interest. ...
  3. Adjustable-Rate Mortgage - ARM

    A type of mortgage in which the interest rate paid on the outstanding ...
  4. House Poor

    A situation that describes a person who spends a large proportion ...
  5. Black

    A description of a positive balance on a company's financial ...
  6. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
Related Articles
  1. Mortgages: Fixed-Rate Versus Adjustable-Rate
    Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

  2. The Importance Of Your Credit Rating
    Credit & Loans

    The Importance Of Your Credit Rating

  3. When (And When Not) To Refinance Your ...
    Home & Auto

    When (And When Not) To Refinance Your ...

  4. The Indiana Jones Guide To Getting Ahead
    Retirement

    The Indiana Jones Guide To Getting Ahead

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center