When to walk away from a mortgage?

I bought an investment condo, which really didn't pan out.
I can still afford payments (in fact monthly cashflow from tenants covers entire mortgage (PIT)) but I'm worried about potential water pipes breaking, or interest rate rises.

To throw some numbers out there.
Purchases for 230.
Mortgage principle 175.
Saw one listed today for Current price 160k

I've been doing lots of reading online, about the benefits of walking away, but many pertain to american markets. Some say you have bad credit for 3 years then you're in good standing again.

What are my options?

1) Sell at a loss. Claim loss of capital gains for a few years (avoids having to buy rrsps)?
2) Suck it up, pay bare minimum into mortgage, hoping to have it pick up in 5 years, (sell at a smaller loss in the future)..
3) Suck it up, pay off mortgage asap. (Just feel like I'm throwing good money into bad with this option).
4) Default on payment. Foreclose property, take a big credit hit.

Any other thoughts?
If I do option 4, and a bank short sales, would they come after my other assets to cover the balance?

TIA

1) Sell at a loss. Claim loss of capital gains for a few years (avoids having to buy rrsps)?

You can only claim capital losses against capital gains, except if you die or go bankrupt, in which case, you can offset income with a capital loss.

2) Suck it up, pay bare minimum into mortgage, hoping to have it pick up in 5 years, (sell at a smaller loss in the future)..

For 'just' a $15k deficiency, probably one of your better options, unless your local market is oversaturated with a lot of supply. Are there a lot of vacant houses or not? You say Edmonton, right, there's not a lot of overbuilding there, is there?

3) Suck it up, pay off mortgage asap. (Just feel like I'm throwing good money into bad with this option).

You owe the debt, and you have to pay. Either way, the bank is getting their money. Short of bankruptcy, there is very likely no way out.

4) Default on payment. Foreclose property, take a big credit hit.

And get sued for the deficiency.

If I do option 4, and a bank short sales, would they come after my other assets to cover the balance?

Generally, yes. If you're in Alberta, and you put a >20% downpayment you may be able to walk away without making up the deficiency. Right now, you're in $15k negative equity, which isn't worth trashing your credit and your reputation over, that's for sure. If you truly have a non-recourse mortgage in Alberta, and you are still cash-flow positive, then why not just keep running the property? It really doesn't matter if you end up defaulting on $15k or $100k -- the hit to your credit record, in both circumstances, is equal. And who knows, maybe there will be some upside of government incentive programs or loan forgiveness programs in the future, who knows.... Especially when all of Canada is severely down the same path.

http://www.blakes.com/english/view_disc.asp?ID=1232

---

A capital loss can be carried over the years but can only be applied against a net capital gain.

2) seems like the best option, your credit score is maintained and you remain cash flow positive.
interest rates most definitely rise.

Big risks you face are in the renewal of the loans, especially since they may ask you to disclose everything you have, and, when they see the negative equity in the one property, ask you for a higher interest rate. So getting rid of the property right now, and only taking a $15k hit, might be preferable. You really haven't given a lot of information on your overall finances to say, one way or the other. Also, coming up with an optimal plan requires many assumptions.