Home Addition - Financing Options

[Andrew Rascoll]

Hi, my fiance and I own a home in NJ and are looking to add an addition over the garage.  Let's assume the total cost of the work will cost 50-70k (quotes pending).  The home was purchased for 580k 2 years ago, is currently valued (according to Realtor/Zillow etc) at 750k, and we owe 450k still.  We love the home and definitely don't plan on moving in the next 5-7 years, and depending on the space added, can see ourselves living here for 20. 

I would normally consider taking out a heloc for this but: 1. Our mortage company doesnt offer them. 2. Rates from other lenders seem high (+7%)  right now.

Our current mortgage rate is 3.17 and we recently/coincidentally got a letter from them saying we can cash out refinance of 90k and the interest rate would be moved to 4.2% (30 yr fixed).  

Would you suggest:

1. Paying all cash

2. Finding a heloc and paying high interest rate

3. Refinancing based on the figures sent from our mortage broker in the letter

4. Combination of the above in some way.

5. Selling the house and buying a new home that has what we want, but would be at about 900k.