Is my cash-out refi a no-brainer? Or am I missing something?

[Bryan Cerro]

This is my first/only property so I am very much a learner still, advise on everything welcomed. 

I've been house-hacking my duplex (other unit rents @ $1,000/mo) for a few years and believe that I should cash-out refi so I can purchase another property but I have a couple of questions. 

Here are my stats:

Purchase Info: $139,900, 30yr @ 3.125% and I put 5% down (looking to get rid of my PMI through the refi)

Current Loan amount: $126,365

Conservative guessessment value (2020): $200,000 

Refi loan amount (75% LTV): $150,000, 30yr @ 3.374%

The data provided by my friend/loan officer shows over the 30yrs I could save $48,059 in interest/PMI, my monthly payments would go from $1370 to $1135 and I would get $14,921 in cash after fees.

Could someone explain the numbers showing how the 20% would be paid to eliminate the PMI? My lender said the PMI is just gone - I guess I don't understand why the bank would waive free money, they were charging me before, if they didn't have to.

Does it work like:

$139,900 - $200,000 = $60,100 (difference in home value)

20% of $200,000 = $40,000 (buh bye PMI?)

$60,100 - $40,000 = $20,100 Cash return - $7639(fees + taxes) = $12,461 cash in hand (close to the estimate of $14,921)

I have been slowly working on improvements myself to learn the value of the work before I look at outsourcing, but that means it is a slow going. What improvements would you consider worth prioritizing before I cash-out refi? Or should I just go ahead as it? Furnace/Roof/Water heater are maxing on life expediencies (~15-20yr old) but I was going to ride them till they died. Exterior windows/doors are looking rough and were my priority to scrap/paint. As well as replacing fixtures/outlets/lighting inside.

Are the fees appropriate? $635 appraisal, $70.50 credit report, $455 processing, $60 recording, $795 underwriting, $840 hard insurance reserves, $4020 taxes reserves. I will get paid out from my current escrow and use that to reduce my fees, ya?

Let me know if I left any useful data out, Thanks! Bryan

[Evan Polaski]

@Bryan Cerro, congrats on getting to this point. You are correct that the PMI just disappears. You are not paying it, you are just showing that the loan is now below 80% of value.

That being said, you can likely get rid of it without doing a refi, granted you will not be cashing out. If $200,000 is the true value, you can call your servicer and let them know. You will have to pay for a new appraisal, but with an appraisal, they will simply drop PMI from your loan.

On to the refi, $200k value, 75% LTV. So new loan is $150k. At closing, you will be issued a new mortgage for $150k, less $126k for current mortgage, less $7,600 "fees" and you should walk out of there with about $16k check to be deposited in your account.

As for the fees you outlined: appraisal, processing and underwriting all seem a little high but not totally out of line.  I typically pay about $400 for an appraisal, and have paid as little as $150 underwriting and no processing.  Recording fees are tied to your location, so they tend to be set.   The insurance and tax reserves are not fees, since you are simply establishing your escrows.  You will pay those at closing, and when your old loan is paid off, within a couple weeks, typically, you will receive a check to pay out your old escrow account.