Income Tracing on Cash out Refi

[Ben Parr]

I'm currently in the process of doing a cash out refi on my primary, and plan to use the proceeds to purchase more rentals. I am planning on counting the loan as a loan not secured by my home per IRS publication 936. My question is:

Do I have to treat the amount put towards the initial escrow balance as a personal expenditure once taxes and insurance are paid? Or can I just discount that amount of the loan as part of the loan expenses and call the proceeds the check I get?