I agree with the above suggestions of choosing #1 and make additional principle payments when you can. You are fortunate to have enough equity to pull cash out for the repairs. Selling and moving is exactly what I would love to do right now but that's just not the best move right now. Maintaining/repairing/adding on to your current home (if you're planning on staying in the area) seems to be the best option. At least that's what I would do (and I am working on doing something similar).