We bought our house in 2006 (it was built in 2005). We presently owe over $260,000 on our mortgage.

Our house is now worth no more that $160,000

Real estate values have collapsed in our neighborhood (there and several vacant houses on our street).

We have an Adjustable Rate Mortgage. Our mortgage payments will increase in Feb., 2010.

We can rent a house on our street for half the cost of our mortgage payment.

We are both employed. We have no credit card debt.

We do not need credit. We do not especially care if our credit report gets clobbered by failure to make mortgage payments.

Our neighbor has failed to make mortgage payments for eleven months. He received a foreclosure notice in the mail. A lawyer told him that he can still live in the house for at least four months longer (without paying anything).

Our State laws prohibit a lender from suing a homeowner who defaults on the mortgage.

If we stop paying our mortgage, we will be able to save at least $20,000 in the next year (we will need this money for college for our kids). Then we can move across the street and rent. Then in three years we can get an FHA loan and re-buy a house at a fair price.

So why not just stop paying our mortgage? What do you think?

The downside is that your credit gets hit for five years or so, but you sound like you can handle that.

You may need that credit when college time comes around.

A better bet is to call the mortgage lender, tell them your situation,and see if they will renegotiate. They stand to lose some big bucks if they dont, and you might get a mortgage that cost less than rental, keep the property, and keep your credit in tact. The bank knows they wont get more than $160K for the house, so they should be willing to renegotiate.

We bought our house in 2006 (it was built in 2005). We presently owe over $260,000 on our mortgage.

Our house is now worth no more that $160,000

Real estate values have collapsed in our neighborhood (there and several vacant houses on our street).

We have an Adjustable Rate Mortgage. Our mortgage payments will increase in Feb., 2010.

We can rent a house on our street for half the cost of our mortgage payment.

We are both employed. We have no credit card debt.

We do not need credit. We do not especially care if our credit report gets clobbered by failure to make mortgage payments.

Our neighbor has failed to make mortgage payments for eleven months. He received a foreclosure notice in the mail. A lawyer told him that he can still live in the house for at least four months longer (without paying anything).

Our State laws prohibit a lender from suing a homeowner who defaults on the mortgage.

If we stop paying our mortgage, we will be able to save at least $20,000 in the next year. Then we can move across the street and rent. Then in three years we can get an FHA loan and re-buy a house at a fair price.

So why not just stop paying our mortgage? What do you think?

In you position, i would probably do the same thing…Quit paying and save some money for a year til they throw you out.

Of course no one can predict what the real estate market will be like in 4 years…The same house could be worth more than 260k in 4 years….or what the mortgage rules will be at that time.