Walking Away From a Mortgage

Some homeowners who can afford to pay their loans are choosing not to.

Jeff Horton did a gut check. The 33-year-old information-technology manager had been dutifully making the monthly mortgage payments on his three-bedroom home and on a condo he rented out for investment income, both in the suburbs of Orlando. But he felt trapped. His properties were worth about half of the $395,000 he had paid for them at the top of the market. In September 2009, after months of soul searching, Horton joined the ranks of borrowers who practice "strategic" default: He stopped paying on both mortgages, even though he could afford them.

"I was raised Southern Baptist. The decision was a moral struggle," says Horton. "My mom had a hard time dealing with it. But I didn't want to be tied down for five or seven years waiting to break even."

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Contributing Editor, Kiplinger's Personal Finance