Refinance as primary or investment property

[Sai Mal]

We currently live in a townhome and are actively looking to move out of the place as our family is outgrowing this house. Its gotten pretty hard to find a place in our area due to crazy demand so I am trying to see if I can at least refinance our current property to drop the interest rate in the mean time. Our plan is once we find a place, we will then convert the current house to a rental.

Given we are intending to move out, I assume that means we will have to refinance this as investment property - is that correct? Note that we will continue to occupy the house until we can find something else. I read some things that refinancing as investment property means we cannot deduct mortgage interest in tax return anymore even if we live here, is this true?

Funnily enough I talked to a lender who suggested we should go for primary residence and mentioned the document we will sign is only the intent to stay 12 months. That sounded a bit fishy to me, did anyone else go through similar thing? Honestly I feel like its better to do nothing at this point and wait for our housing situation to work out and then go for refinancing, don't know if we will continue to have low interest rates like now.