Stripper - Home Financing

Posted in Finance, Accounting and Economics Terms, Total Reads: 532
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Definition: Stripper - Home Financing

A slang for individual homeowner who strips (removes off) the equity of the house he owns by mortgage refinancing. The money so obtained is not reinvested but spent on consumption. Strippers get these proceeds based on two risky situations.


First, they borrow when interest rates are low.

Second the value of house would rise continuously because if the value dips, there would be no re-financing.

If the interest rates rises in variable-rate mortgage, the stripper will not be able to pay the installment, they may have to save more and reduce consumption. The situation is a vicious cycle, the deeper the person goes in red, and the harder it is for him to come into the black.

 

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