Stripper

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.

BREAKING DOWN '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.

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