Buying out 50% partner in rental, not sure which loan to go with

[Blake Lawrence]

Pardon the newbish post, my financial strategy needs reworking and I am hoping for some feedback here to help.

I am in the process of my buying my partners stake in our  short rental in Maui.  We split the down payment (55k ea) with a 366k purchase price. The market has gone up a good amount and the current value is around 480-490.  For this example lets use $480k. My payment to my partner will be (480 x 0.93 - current loan balance) /2. Basically as if we are selling it today. 

I am going to refinance the place and have been offered two options. Note - Both rates may go down 0.5% depending on the underwriters view of a second home

Option 1 -

Pay off the current loan and receive no cash out. 
Loan - 250k @4.25% with 0.4 Points. Monthly payment at 1229

Option 2 -

Value at 480, 75% cash down, 110k cash back to me at close.

Loan - 360k @4.5% with 0.5 points. Monthly payment at 1824

I do not need the cash to close.  And at the moment I am not terrible active in finding other properties. My main business does require a decent amount of cash (outside of REI) but I don't have any issues there at the moment.  Lazily, I would probably give the 110K to my FA and have him invest it for now until I locate a property that I would like to buy perhaps in 2020. Aside from the home I live in, I own one rental property with roughly 300k in equity in it and another that was just refinanced, not included this one I am mentioning here.  I've gone back and forth.. the higher payment does offer some tax relief (roughly $230 more than option 1) and in order to grow it seems backwards to have two properties with a lot of equity in them.  On the other side, I don't need it to close and haven't identified a property to use it on right now either so why bring on the higher debt.

Any thoughts on this situation or just a general practice in regards to keeping equity in a place.  I know this is a bit unique as its not a full cash out and I am having to do a loan regardless.