Cash-Out Refi or Selling

[Jacky Fan]

Looking for advice on what I should do with my current home as I look for my next primary residence. I currently do not have enough down payment.

1. Sell the current house (current mortgage at 3%) and use the gain for down payment and 1031 exchange for the new home.
2. Keep the current house, cash-out refi at higher rate for cash, and convert to investment property (assume 0 cash flow per month).

What would be the best option? Thanks.