No. Mortgage interest, in any loan including the HELOC, is never added to the cost basis of the home. It is not a sales or a purchase expense.
Mortgage interest is only a deduction on your tax return if you itemize deductions and it is your main home or second home.
The principal used to purchase the second home is included in the purchase price of the second home as well as any closing costs that are not currently deductible (mortgage interest and property taxes). Recording fees, sales commission, transfer taxes are examples of items you can add to the cost basis of your second home from the settlement statement. You will also include any capital improves to the structure such as a complete remodel, a completely new roof, etc. Repairs are not added to the cost of a home.
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