Smart people advice - get out of home

[Nothinmuch]

Need smart people advice.

We have 2bd/1bath with 3 kids and 2 adults. We need a bigger house! (and a nicer neighborhood). We owe 160k on the house but it’s probably only worth 145k. I can easily afford the mortgage, but don’t want to live here any more! I’d like to refi, but it’s underwater and not a fanni/Freddie loan.
What do I do? Walk away? Rent it out at a loss (probably 500/mo)? Take out a loan for 20k and pay down the mortgage to get out?

Any thoughts are appreciated.
Thanks,
Conflicted.

[Greebo]

Need smart people advice.

We have 2bd/1bath with 3 kids and 2 adults. We need a bigger house! (and a nicer neighborhood). We owe 160k on the house but it’s probably only worth 145k. I can easily afford the mortgage, but don’t want to live here any more! I’d like to refi, but it’s underwater and not a fanni/Freddie loan.
What do I do? Walk away? Rent it out at a loss (probably 500/mo)? Take out a loan for 20k and pay down the mortgage to get out?

Any thoughts are appreciated.
Thanks,
Conflicted.

Lets look at the negative options first:

Walk away - house goes into foreclosure, you trash your credit, you can't buy another house for a few years so you are stuck renting. I'm ok with renting, I'm not ok with abandoning your obligation to repay the money you borrowed if you can afford the cost. The bank is not to blame because you over-borrowed on your house - you asked for money, you got money to buy a house, you owe the money, so as long as you can afford the house you should pay for the house.

So - what can you do? Well you can scrimp and save like mad to be able to pay down the extra $15,000 plus closing costs (probably another $8,000) so you can sell the house. Then you can rent for a year or so while you scrimp and save some more in order to be able to put down a decent down payment on a larger house.

Renting it out - bad idea overall if you can avoid it for several reasons. First and foremost is nobody should be a landlord by default. I *am* a landlord, I manage 6 rental units across 3 properties, and I went in eyes wide open as a deliberate, conscious choice. If you just become a landlord cause you sort of wander into it you will get into trouble in a big, big way. It's a job and a business not a hobby. Also, if you rent it out and take on another mortgage then you have to carry two mortgages when your tenant doesn't pay his rent - that'll lead you to foreclosure or worse really fast.

So I say you save a bunch, pay the house down, save a bunch more, sell the house, rent a few months while you find a new house which you then buy with the bunch of money you saved.

You can certainly go another route - but those routes end in bad situations long term while seeming smart in the short term.