Turning owned residential into a rental- 'cash out' to buy new ho

[Jesse Inman]

The situation: 

My current home is 100% paid off. I plan on taking 30% of the value "cash out" to help with my down payment on a new residence (upgrade home) to keep me out of a 'jumbo loan' situation as well as be able to write off the interest on the new home (new mortgage will be under $750,000 with the large down payment). 

I've been told I can depreciate the upgrades I've made on my current home when it becomes a rental (depreciation over 27.5 years) but cannot write off the interest on the rental because the 'cash out' money was used on the new home- the interest rate is .5% higher than a residential rate.

Question: is there a smartest move to make in this scenario? Anything I'm missing to help save me cash?

Thanks in advance!