Based on a recent ruling by the 9th Circuit Court of Appeals, each of you gets the full $750K separately. For details on the ruling, see the article at https://www.journalofaccountancy.com/news/2015/aug/mortgage-interest-deduction-201512809.html
So each of you can use your "Approach #2" scenario. Apparently, it's already been challenged in tax court, and the IRS lost.
