Not true, need more info though on what's going on

You cannot use refinanced property's bank interest to offset rental income. Speak to a certified tax consultant or accountant

I think you can. I would claim the interest as expense.

Google Public Ruling 2/2011 and read Section 9, and example 16 Madam Leong’s case

If you used loan at the time you buy the property, I would argue with LHDN section 9 PR2/2011 applies to you. Your ability to repay your loan earlier does not forbid you from claiming refinanced interest expense as you can claim it is temporary

Temporary - meaning when you fully repay the loan early, you say it was temporary. You could have use the extra cash for other purpose at that time. Now that you get new loan, it is to serve the original purpose ie. financing the property. LHDN gets extra tax from you when you incur zero bank interest, so it was beneficial to you and them together

Yes your case is slightly different from Madam Leong's case. So when you talk to the LHDN officer, argue the repayment of loan is just temporary, now you want to put everything back to normal.