Another point to consider, is the OP working around San Diego? Consider how much is saved from gas costs to offset that loss of $500 in mortgage vs. potential rent. I have friends that were spending around $1000 in gas every month to drive back and forth for work in Carlsbad. They switched to more gas efficient cars, so even if they have 2 more new car payments they are still ahead.
In the same situation, I would rather struggle a bit while keeping the TV house while renting in North County. Maybe rent a smaller place in North County as well so that the strain financially is not as painful.
