I would say that if your home is worth as much as you say it is currently, then I would do a cash-out refi of the first mortgage for $160-170k at a fixed rate around 5.00%. You won't suffer a hit to the interest rate for cash out when the loan to value stays below 70% of the appraisal value.
I think you would find a much better all-arround loan and you would have the lowest payment possible with it. Plus you keep 2nd position open for any future needs.
If you have any questions, please let me know.
Bank of America Home Loans