You are correct. Please see this example taken from the link below.
- Example 3: The taxpayer wants to acquire an additional rental so she refinances one of her existing rentals to obtain the down payment. The interest on the loan must be allocated between refinancing the existing rental loan and the portion of the debt used to acquire the new rental.
https://www.taxcpe.com/blogs/news/tracing-rules-that-apply-for-deductibility-of-interest
