How to use my equity

[Matt Lockmon]

In 3 years we've gained $115K in equity in our home. I'm close to 80% LTV and about to drop our PMI. As a first time homeowner and real estate investor my goal is to create cash flow. The two paths I'm looking at in front of me are:

1: Keep the property as a rental and use the equity as a down payment on another home. Rent in the area for a similar home is near what my mortgage payment is currently, within ~$100-200. And after my PMI goes away it would flow about that over my mortgage payment.

2. Sell the house and cash out the full equity to put 20%-30% down on a new home. (Not a brand new home. A side step house to keep mortgage payment similar to where it is now or drive it down further.) Use any remaining $ in equity to pair with savings to purchase rental property.

Leftover questions:

- Do you have to REFI to drop PMI?

- Any pros/cons to a REFI cash out when I have a low rate already and a refi would give me a higher rate? I.e. 3.875 to 4.0.

- Difference between a cash our refi vs. HELOC?

Thanks.

Matt