Refinance or Sell and Rent? (appraised, agents, condominium, comparable)

[aep73]

As with many other people, our family has gone through a rough patch over the past couple of years but we are slowly beginning to come out of it. We currently live in an area with a high cost of living and we own a small condominium. The condo has actually gained a little bit in value (approx. $40K) since we bought it in 2004. Our ARM is up next January (2011) and we still have $120K remaining to pay off.

Until my spouse was able to find part time work in retail less than a month ago (out of work for 1 year +), we were looking at moving to another state with a cheaper cost of living. We're now looking at staying in the area for at least the next year. We make enough to save a little bit each month and fortunately are not extravagant people.

Our question is, should we sell our condo now while Uncle Sam is subsidizing purchasers and before interest rates go up, or should we refinance and stick it out more long -term? Rent is approximately $100-150 less per month not including utilities, etc. We're not sure about living here long-term due to how expensive the area is, but the area is great. How long would we have to stay here to justify refinancing? Are refinances based on original purchase price or current value? And what other factors should we take into account when making our decision?

We're trying to make the best decision for our family. What would you do?

Thank for your opinions and information!

[rjrcm]

The first step is to verify your condo's value. How did you arrive at the $40K appreciation value? You should check recent (~3 mo) sold comparable condos. You can call some agents to provide their market analysis. Condos have generally been hard hit, so I'm surprised you have a gain, but perhaps your market is different. Lenders will base refinance on current market value, they will have it appraised.