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i just started a lease with a tenant and now because of a layoff i won't beable to pay the remaining part of the mortgage payment that i have been making so that the rent was low enough to get the home rented.  now that i cannot make the rest of the payment the house will go into forclosure if i don't get it covered would it be ok to let them know of this problem and ask if they can pay higher rent or let it go into forclosure.  i don't have the money to pay back their deposit would i have to do that and can i be sued for breaking the lease do to loosing the home.  which would be the best way to do it?

You are legally bound to return their deposit, unless you have grounds to keep part of it for repairs or unpaid rent. As for the property, you could either stop making the mortgage payments and keep collecting rent (the tenants are protected even if it goes to foreclosure - see this article:, but of course you'll lose the property. Alternatively, you can ask for higher rent, but of course the tenant is within their rights to refuse. A third option is contacting the mortgage lender and negotiating for lower payments; occasionally this is successful, and is at least worth a try before you default.
Stop paying the mortgage. Keep collecting the rent. Save up enough to return the deposit. In the mean time, negotiate with the bank once you are 2-3 months behind to do a short sale, refinance with a lower payment, or just default and go into forclosure. That should give you plenty of time to keep collecting rent and pay back your deposit.
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