If you enter the 1098 for the Home Mortgage Interest and the home was a personal residence turned rental, you do have the option of entering the 1098 and letting the program make the allocation.
In your situation, I would not do it that way.
I suggest you enter the 1098 for the home and indicate that it was paid off. Next, enter the second 1098 for the new home.
Enter the interest as an expense directly on the Schedule E for the rental.
TurboTax probably won't handle the loan balance the way you want it to if you enter both 1098's in the home mortgage section and not adjust the balance.
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