re: What to do with 1 year increased pay?

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paying down that mortgage to eliminate PMI is a no brainer to me if you plan to be in the house at least another year.

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This is definitely a thought I've had, but I'm not quite sure how it works (first home) so im glad you mentioned it. Let me know if anything I'm saying is off-base.
My understanding is that I would need to get it re-appraised and my loan will need to be less than 20% of the total value of the home. So if the home appraises for $380k then I need to owe less than $304k which would mean paying $31k down on the principal. Re-appraising is not a refinance so it won't affect my mortgage rate, but it will cost ~$500.

My struggle is that it feels like I'm tying up $31.5k in exchange for $1900 per year. Yea I guess that's a 6% return, but my 401k has been outperforming that plus you have to think about the tax savings from the 401k (and I believe you get a tax deduction for PMI?). I'm not sure how much to value the 3.25% return from paying down the mortgage if I only expect to be in the house for another 2 years or so. Is it really best to tie up all that money? That could be used for a down payment on a rental property if I chose to get off my arse and jump into that world, though I don't know what I'm doing so that may be a ways off.