Renovation loan or cash-out refinance for a $75,000 property upgrade?

I’m comparing two ways to fund improvements on an investment property and would appreciate input from members who’ve weighed the documentation requirements against the financing risk.

The property is currently estimated at $425,000, with a mortgage balance of about $250,000. The proposed work would cost approximately $75,000. It includes some structural repairs, electrical and plumbing updates, and a kitchen and bathroom refresh, so it isn’t purely cosmetic. The property won’t be owner-occupied.

A renovation mortgage seems attractive because the improvement costs could be included in the financing, but I’m concerned about contractor approval, draw schedules, inspections, change orders, and the possibility that the project won’t meet the lender’s requirements. A cash-out refinance appears more flexible for managing the work, but the higher loan balance and payment would depend heavily on the appraisal. If the completed value doesn’t support the expected valuation, that could reduce the available cash or make the payment less comfortable.

How would you compare these options with roughly $175,000 in existing equity before transaction costs?

- Would the renovation loan’s project controls be worthwhile for a repair scope that includes structural and system work?
- For an investment property, are renovation mortgages generally restrictive enough that a cash-out refinance is the more practical route?
- Which appraisal should carry more weight in the decision: the current as-is value, the projected value after improvements, or both?
- How much payment cushion would you want before choosing the refinance option?

I’m especially interested in how investors evaluate the tradeoff between a potentially lower renovation-loan payment and the added contractor documentation versus the flexibility and appraisal risk of cash-out refinancing.