Need help with refi

[Daniel Mobley]

My wife owns a small 2-bedroom townhome with a 30-year fixed FHA mortgage of $120,000 at 5% which is our primary residence. Her father is also on the mortgage as a cosigner. We want to refinance the property to not only get a better rate, but also take her father off of the mortgage. We anticipate within 3-years of buying a new, larger home and keeping the townhome as a rental. I have a couple of general questions:

1) What term mortgage should we consider with the above goals in mind 15/30 year?

2) Should we put any money into the house as part of the refi? The townhome is appraised at approximately $130,000 so we are considering putting enough down to get 20% equity and have no PMI.

3) I am assuming that when we buy our new home that we would be able to get a new primary (low interest rate) mortgage as we will be moving there and also keep the favorable interest rate on the townhome, but I don’t know exactly how all of that works…

Any additional thoughts, advice greatly appreciated.

Thanks!