Where to borrow money for remodel?

[Bridget Ariel]

Bought a house for 1M with about 230k down at 2.9 interest for a 30 year mortgage. House includes a non permitted, detached ADU in the back where I live. The main house is being rented for $3,700. My mortgage payments including property insurance, interest, etc is about 4,333.00. I want to add a second bedroom to the 1 bedroom "ADU". The cost is about 80k. We are looking into refinancing and pulling cash out. Our appraisal came in at 1.15M one year after purchasing the house. Is there a better way to borrow money for the addition? Our broker sent us new rates ranging between 3.5% - 3.75% and our payments would jump $300/month plus closing costs. This is for a 30 year fixed mortgage. Thoughts?