Your situation might be complicated enough that you should either review IRS Pub 936 yourself or speak to someone.
https://www.irs.gov/pub/irs-pdf/p936.pdf
There are lots (and lots) of rules about how to decide how much of a mortgage's interest is deductible.
I think the question is asking about the case where you have an existing mortgage that you eliminate by taking out a new mortgage. The new mortgage is only deductible up to the amount of the original mortgage. But often people take a new mortgage at a higher amount because the value of their home has gone up, and they're qualified for more. Then you get "cash out" of the new mortgage after it pays off the original. That amount of the new mortgage is not deductible.
