Cash out re-fi to purchase rental vs commercial loan?

[Eric Gay]

So, my wife and I are taking the leap into leveraging a (as in one, so don't worry, I'm not going leverage crazy over here) property for the whole "put a little down and let the tenant pay it off then sell it for a profit" thing. 

I've been presented with two options. A) Take out a commercial loan with 20% down. B) Do a cash out refi on our paid-for home with 0% down and a lower interest rate to boot.

If I choose option B, I would take the cash, move it into my business account as capital and purchase that way. So, either way, the property would be in our rental LLC.

I'm confused on two things. 1) If I can deduct the interest on the cash out refi like I could with a "regular" mortgage and 2) I would have to pay the mortgage by writing myself a check from the business account, so I'm worried about paying earned income tax on that as opposed to just at the business tax rate. Unless I could pay the mortgage from the business account, maybe I can, I have no idea. That's why I'm asking you smart people! 

Has anyone purchased a rental property this way? I'd love to hear your experiences!