What is Equity Stripping?

Equity stripping is a practice that is used in order to eliminate a claim on a piece of property by a creditor. This is often a scheme that is used to take advantage of unsuspecting homeowners as well. Here are the basics of equity stripping and how it can work.

Equity Stripping

One of the most popular variations of equity stripping involves a foreclosure rescue scheme. A company will offer to help those that are getting close to foreclosure on their home. The company will offer to come up with an arrangement to keep the individual in their house. They are going to essentially buy the property from the individual and save them from foreclosure. With this arrangement, the company is going to allow the individual to live in the house and pay them rent. Typically, these companies will make false promises about being able to sell the property back to the individual after a certain amount of time. However, with these arrangements, there is typically nothing in writing and the homeowner loses all of the equity that they had in their house.

Removing Equity

You can also strip the equity in an asset by borrowing as much money as you can against the equity. This will remove any equity in the property and make it impossible for creditors to collect anything against it.