Manipulating cursor direction in 3D space

I'm currently working on a point-and-click physics based game. To do this, I've created a cursor game object that's to represent the cursor and be able to interact with other objects.

My problem is that I have the cursor able to move up and down in space, as well as forward and back while it's colliding with the ground, but instead of moving towards the camera in the mouse's true position, it instead trails off screen unless perfectly perpendicular with the camera.

I've tried to implement a "pinch" that would restrict the cursor's x-axis as it got closer to the camera, creating the illusion that the cursor is always perpendicular. This however created an unwanted curved effect as seen here: https://i.gyazo.com/8b47e4265b713b0b4e689f14f3c97e41.gif

What I want is for the cursor to move straight towards the camera, staying in range with the actual cursor- instead of trailing off into an offscreen perspective.

I'd like for it to look more like this, without any curve: https://i.gyazo.com/3d710dcba7707d50d37cfc75b00e7a13.gif