First Time Homebuyer Multifamily FHA + 203k Refinance + Cash Out?

[Kristen Miller]

Hello! Long time reader, first time poster! My husband and I have recently purchased our first home and investment property using an FHA backed loan with a 203k rehabilitation loan component. The initial purchase price was $475,000 with a rehab of $160,000 and a 5% down payment of $32,000 for a total mortgage of $603,000. There are two homes on the property, one of which we will live in and one which is a rental unit bringing in $1,700/ month.

The loan is a relatively high interest rate (~4%) and carries mortgage insurance of $425/ month.  The appraised value of the property after renovations are complete is around $675,000.  Needless to say, we want to refinance into a traditional mortgage ASAP.

Here's my questions:

1. We would like to cash out approx. $30,000 to pay off some high interest consumer debt.  Will banks approve this and also allow for the mortgage insurance to be dropped from the loan?

2. At the initial closing, we placed $10,000 into a Mortgage Insurance Escrow account.  Since the $425 mortgage insurance payment is included into our monthly mortgage payment already, what happens to that escrowed money when we change loans?

3. I've received differing advice on when to refinance.  Many advise waiting six - nine months after close of the initial loan.  It seems to me that getting out of the mortgage insurance and high interest rate sooner rather than later would be wise.  Is there something I'm missing?  What is your advice on timing?

Your advice and experience is much appreciated!