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Should my dad let his house foreclose?

My dad bought a brand new house 145k. Now with the recession, its worth only about 80 or 90k. My dad mortgage is about 1900$. My dad has a good stable job, (no chance of him getting laid off). My mom works also. We are able to afford the house. But my dad says it is not worth paying for it. We still got another 10 years to pay, while neighbors have 20 years to pay. My dads plan is to stop paying and save the mortgage money to but a luxury apartment or a new house. He says we stop paying, leaving us 6 months to save money. Is this a good investment or plan. Should we let go of the house.

Public Comments

1. If you can afford the house, I say just hang on to it and pay it off. The house will eventually (though probably not immediately) be worth what you paid for it. The immediate financial benefit will certainly be offset by the difficulties that having a foreclosure on his credit will present for the next seven years. By the time the foreclosure is off your parents' credit report, they would be almost finished paying off the house. Now if you were talking several hundred thousand dollars underwater (as is the case for many homeowners here in Southern California), it might be financially more worthwhile. But in your family's case, you might want to just pay it off. In another ten years the market will probably be in much better shape than it is right now.
2. I would imagine that letting the house go into foreclosure will really make a dent in your dad's credit rating. Unless he has cash to pay up front for the new place, and any other purchases, he may not be able to get additional loans for other purposes. If your dad can negotiate a mortgage loan modification, it can change one or more of the terms of the mortgage, and lower his payments. It seems like a better idea than allowing his house to be foreclosed on.
3. No, it's not a good idea. If you let the home foreclose, yes, your parents would be saving the money that they would otherwise be sending toward payments. But the foreclosure will drop your parents' credit scores so much that it probably would be impossible to be approved for a new mortgage loan on a new home. They are honestly better off continuing to pay on the home they have and hoping that the market turns around soon. The reality of the situation is that markets fluctuate and sometimes you may be upside-down on your loan. The only time being upside-down really matters is if you are actually trying to sell your home. If your parents are not wanting to sell, then they shouldn't worry about being upside-down and should continue making their payments.
4. I guess your dad thinks he can save up and pay cash for this luxury apartment? With only 10 years left on the mortgage, your father is very shortsighted to default on his mortgage. If he thinks he is going to save up a down payment and get another mortgage after messing this one up, he should think again. He won't get financed for a home for a few years. Tell him he is being irresponsible. Especially if he can afford the payments. Tell him he is setting a bad example for you.
5. It's a very bad idea. First if you can make payments and refuse to do so, why would another lender want to give you money in the future. You've already shown that your signature on a contract means nothing. Your credit is screwed, and you have behaved dishonorably. A house is not a short term investment. The value of the house will increase again as time passes.