Just bought with FHA. Should I refinance conventional?

[Randall Brooks]

Hello Everyone!

I just purchased my first property with a 30/yr FHA Loan. A little back story, It is a 4br/2ba tri-level house. We can rent it in the current condition for $900/month. We are in a college town, walking distance to the college so we are wanting to convert it into a 3br/2ba and have a student rental 1br/1ba. We would do a small renovation which would include; seperating power/AC for units, redo flooring and paint, add kitchen downstairs, removing a stair case, ect. We would be house hacking this living in the upstairs 3br/2ba while getting the student rental ready.

Whats my problem?? Well we purchased the house for $120k and seller paid all closing. Loan value will be $117k at closing. The property appraised for $131k. $14k in equity.. cool! But I am considering going 30/yr Conv. ($618/mth) or 15/yr Conv. ($895/mth) now that we bought at a good price. After speaking with a banker, I would have to pay down 20% of the appraisal price to refi and not have the PMI.

My current payment is $801 with FHA 30/yr. If I come up with $12,200 is it in my best interest to refinance? My cashflow after reno. will be $800/mth without refinance. So if i wanted to pay off $12k and lose $100 a month I could cut the loan in half. OR I could be extremely happy with the fact the I have only $4200 in a property and it will cashflow $800/mth.

What are your thoughts, again this is my first purchase and I may be over-thinking everything!