I have to agree with David. There is a misconception that money in means money out. Many homeowners put in $80,000 kitchens, and then are dismayed that home's value only went up $20k. My second guess is to get your own appraiser to look at the property. The bank may be skittish about the value of your home since it is considered a smaller loan, and if they can keep you at 12.25% they are rolling in the profit. Talk to a new bank!