for the old house, i agree with the math. (but I think you meant 1/1/19 as the $426,000 balance - not 1/1/20.
but for the new house, take a 12 point average of the ending balance of each month..... months 1-7 will each be a zero, then month 8 is 742,500..... look up months 9, 10, 11 on your monthly statements and then month 12 is 740,000. The average for the year will be somewhere around $310,000.
add the $310,000 to the average ~$423,000 and you are at around $733,000 for the average for the year. then everything is deductible.
the instructions in the middle of page 13 of publication 736 state:
Statements provided by your lender. If you receive monthly statements showing the closing
balance or the average balance for the month, you can use either to figure your average balance
for the year. You can treat the balance as zero for any month the mortgage wasn't secured
by your qualified home.
note the bolded sentence. The $750,000 limit is not predicated on the 12/31/19 balance, it's the AVERAGE balance for the year.
You will have a problem in 2020 since the January, February and March balances are clearly well above $750,000 (as both mortgages are outstanding) and that will affect the average for the year. But same approach for 2020, that mortgage on the house you sold will have eight zeros as part of the 12 point average for 2020.
Then in 2021, you should be fine, since the remaining mortgage is below $750,000.
