Stripper

Stripper

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

Notes:

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 their home value will keep rising. But, any dip in the housing market will prevent future refinancings. Second, strippers usually borrow when interest rates are low. If the stripper has a variable-rate mortgage and rates rise again (as they always do), he or she might not be able to afford the mortgage payment. Sooner or later the stripper will have to reduce his or her consumption and start saving to pay back loans. It's a vicious cycle because the deeper into debt a person goes, the harder it is to get back into the black.

See also: Adjustable-Rate Mortgage (ARM), Home-Equity Loan, House Poor, Mortgage