I'm trying to make a smart long‑term decision and would appreciate outside perspectives. Here’s my situation:

Home:

• Located in California
• Current mortgage balance: $407,000
• Interest rate: 6.25%
• Monthly payment: $2,542
• This is my only debt

Financials:

• $50k emergency fund
• $150k in a high‑yield savings account
• Income: $75k/year from my job
• Additional $4,100/month from VA benefits
• I live below my means and save consistently

Goal:
Move into another home soon and rent out my current property.

I’m deciding between two paths:

Option 1:

Use the full $150k to aggressively pay down the current mortgage, reduce the monthly payment significantly, rent the home out, and then use my VA loan to buy the next home with little or no down payment.

Option 2:

Put $50k toward the current home to lower the payment modestly, and keep $100k as a down payment for the home I plan to live in next.

Additional detail:
I plan to wait until interest rates drop to around 5.25%, and at that point refinance while putting an additional $50k toward the principal to further reduce my payment before renting it out.

My question:
From a long‑term perspective, which path seems smarter? I’m not looking for formal financial advice—just insight from people who have gone through similar decisions or understand the trade‑offs better.

What would you do in my position?