How would you handle a upside down mortgage of $130,000?

I agree with the others. Stick it out for a while and see what happens with home values in your area. There are bound to rise in the future

The best thing you can do is try to pay down the mortgage as much as you can. Apparently you can afford the mortgage so pay extra each month do get it down. If this is the house you are planning on staying in for a long time then you will get your money back.

A house is not an investment. It is a place to raise a family. That is the problem. People buy houses today (couple of years ago) thinking they were going to make a bunch of money on them.

Raise you family in it and you will make money when you sell.

Thinking as you are is what is causing all the problems we have in the market today. Because when you walk away the house will not even sell for the $270,000 and will sell for even less. Now the prices in the neighborhood fall even more, etc.

You signed a contract now live up to the contract. That priced house will not take that long for the $130,000 to be regained once the market turns around.

First thing you did wrong was to buy it with nothing down. So you have no real incentive to stay. The idiot at the bank should be tarred and feathered in the town square.

Some pretty harsh answers out there for you. If you don't have to move and don't have some other financial catastrophe you're dealing with, then I would agree with the advice to stay in the house -- the market will come back around eventually and you may be just fine. If you must move and can't afford to sell, have a conversation with your mortgage lender and find out what you need to do to start the "short sale" process. This is where the mortgage lender will accept less than the payoff when you sell, but they have to approve any sales contracts. Beware though, you may have a tax burden on the amount of debt the lender "forgives" on the sale, and I don't think it's that much better on your credit report than a foreclosure. Hope you can just stick with it and wait for the market to turn. Good luck!

I'd continue to make the payments on the mortgage as agreed.

You made two errors, the first of which is buying a personal residence as an investment, which it isn't. It's simply a place in which to live. If it happens to go up in value, that is a good thing, but it should never be viewed as investment grade purchasing.

The second error is assuming that the home value will remain at $270K. Do you not think that it can go back up just the way it went down ?

Suck it up, pay your mortgage, and wait for values to rebound, which they eventually will.

Ruining your credit with a foreclosure is not the way to go unless you have no other choice. You will be fortunate to get a credit card with a middling limit, and won't be able to purchase another house for about five years, thanks to your lousy credit.

Walking away ruins your credit for 7 years. You will have a hard time buying or even renting in that time period. If I was in your situation I would read up on the ramifications of the options in your state. Easy for other people to say to stick it out but you need to look after #1 and not the hedge fund that bought the investment from the bank that gave you the $$.

wow, that's a major loss of equity there.

yeah, since you didn't have any money down, and you have only been paying for about 2yrs worth of interest. I'll mail in the key, too.

if you walk away, where else would you live--in your car? i would think if you walk away, that would make it hard to get another mortgage somewhere else.

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