Looking at Cashout Refi Please Help!

[Jordan Johnson]

So my wife and I are looking to buy a bigger house with the edition of our now 1 year old and also having a 5 year old running around... Our current residence is a 3/1 1420sqft and is located in a very nice, small town in DE with a very sought after school district 3 blocks from the school. We purchased the house almost 8 years ago for 90K ($63/sqft). We have since updated the house by redoing the kitchen (quarts counter tops, tile floor, tile backsplash, and upgraded to stainless steel appliances. We also redid the utility area by installing tile floors. The upstairs of the house is on single room that we completely renovated and just finished last month (removed plaster, new electric, insulation, drywall, and new ductless heating and air unit). Now that we have the ductless unit upstairs that room will be counted towards our sqft. With the new sqft added I believe we will be at 1620 minimum. Our mortgage payment on the property currently is $650/month. My thought was to look at every option possible to keep our current property and still obtain the new house. My thoughts were to do a cash out refinance and use that money (or some of it) toward a down payment on the new property. After doing so, we would rent our current property... Thoughts??? As of now it looks like we could get a minimum of 40/50k in the cashout and the mortgage would go to about $850/month. Through research we believe the property will rent for $1200/month... these numbers would be going off of a $150 appraised value which could easily be higher considering market prices and appraisals we have seen locally lately... my question is this... would you do this? If so, how much would you be willing to take out on the cashout refi? I like having some cushion between the "new" mortgage price and the expected rental price... but would you consider taking for cash out (if the opportunity presented itself). This would of course increase the price on the new mortgage. I think there is a possibility of being able to pull between 55k-65k out (but I say 40k/50k because I like to be conservative with expectations. I want to know if this process would make sense to do, and if not, why. Of course there is always the option of just selling as well but I wanted to figure out a way to get the new house and still keep the old one as rental... whereas if I sell, I get all the cash but only have a primary residence that will only cost money.... PLEASE let me know your thoughts about this plan, if you would do it, why, why not, and if you would do something different, what would it be! Again, thank you so much for any input or advice!!