So I called our Mortgage company. Apparently they won't automatically cancel our PMI even though we have passed 80% LTV. I called a couple times and they required we do an appraisal. So this will cost us about $300-500 depending on who does it.
Without PMI, our mortgage at 5.5% would be 1098. Add 200 for insurance and tax, and that means a monthly payment of about $1300.
Looking at our current situation, a refinance would reduce our monthly payment considerably but the closing costs are higher than I expected.
Okay, here's the breakdown from one loan officer:
A 177,000 loan for 30 years @ 4.375% would be: $883, plus $200 would be $1083, saving us about $220 a month.
A 177,000 loan for 15 years @ 3.8% would be: $1291, plus $200 would be $1491, an extra $200 a month but reducing the interest over the entire loan by about $75,000.
So, I'll let you know what we decide to do. I'm also considering a cashout, but that depends on how much the house appraises for.