Legal Question in Real Estate Law in Arizona

If you just walk away, the mortgage lender will have to foreclose on the loan because of your default (failure to make the payments due). After the foreclosure sale, the buyer will own the property free and clear. If the home was your principal residence and the money borrowed was to purchase or improve the property, any deficiency from the amount owed will be foregiven, that is to say, the lender cannot ask you to pay any balance due, nor will you have to pay income tax on the loan amount cancelled by the lender.

You could list your house for sale (as a short sale) and continue to occupy the property until you are required to leave, this way a foreclosure may be avoided. There will still be a negative on your credit report, because under either option, you will not be making your payments when due.

You should consult with experienced legal counsel to discuss your options and help you to decide which is the best for you, given your specific circumstances.