How to Charge a Cash Debt

• Many credit cards come with the ability to take cash advances. If you've got a card like this, and your credit limit is at least as much as the difference between the sales price, after commissions and sales costs, and your loan balance, using your credit card doable. You don't have to wait until the sale closes, just send in a check issued by your credit card company or call and have the company credit your mortgage account. When it comes time to close, you'll owe just what the lender will receive in sale proceeds. If your card does not allow cash advances, or places a low limit on advances, you may have a harder time. In this case, call your mortgage servicer and see if it will take a payment from your card in the amount you'll be short at the sale.
  
  

Payment Alternatives

• If your credit card interest rate is high, exchanging your mortgage debt for credit card debt may not be such a smart move. If you end up not being able to pay it off, you could easily end up with more debt than you started with. If you are sure you want to pay the difference, consider other sources. Many employers -- up to 88 percent according to "Kiplinger" -- allow you to borrow from your 401(k). The IRS limits how much you can borrow to the lesser of $50,000 or 50 percent of the account balance. You will have to repay the account with interest, but the interest rate is usually only one or two percent over the prime rate, likely much lower than the interest you pay on a credit card.
  
  

Keep the House

• Having an underwater mortgage is unnerving at best. Nobody likes carrying around debt. But if you sell the house and transfer the debt to your credit card, you still have the debt but now you don't have the asset. If history is any indication, the real estate market will not stay down forever. If you keep your house, each month you'll be reducing the debt through the principal contribution of your mortgage payment, and eventually the house may recoup its value. And even if the market never comes back up, eventually you will pay off the mortgage entirely. If you have to move, for a job or school, consider renting the property out for a while.
  
  

Other Options

• You can always inquire with your lender about a loan modification, in which the principal balance is reduced. Certainly, there's no guarantee this will fly, but if you don't ask, it definitely won't pan out. Look also at the possibility of a short sale. In California, for instance, a lender that agrees to a short sale gives up its right to go after you for the difference. And through 2012, federal law provides an exemption from taxes on unpaid mortgage debt associated with a foreclosure or short sale of your principal residence. All these options will result in a big hit to your credit but you may be able to walk away with a clean slate.