Bad appraisal should I still refinance?

[Chris Sullivan]

I am in the process of refinancing (conventional) an owner occupied duplex. Purchased with an FHA loan 3.5% down in 2018. Due to lack of any comps in my town, appraiser used sales from another less desirable town and appraised ~$30-40k lower than expected.

To complete the refi now, I would have to cash-in $27k. Interest would go from 4.25% down to 3%, and get rid of MIP for the life of loan. Currently the property would break even if I move out, but this would reduce the mortgage ~$500/month making it much more desirable to own. Should I tap into retirement savings to fund this?

[Tyler Warne]

Can you derive an adjustment for the difference in towns? Could you find 3 comps of a single family that is common in both and show that there is a 5, 10 or 15% difference in the location? That would be sufficient support to help the lender go back to the appraiser and say - the borrower states there is a difference in location, here is his evidence...

-Tyler