Did your banker know that you were taking out a personal loan to pay off a mortgage? if so, he/she did you a great disservice. I'm surprised that you couldn't get a better rate on a mortgage (secured by real estate) than on an unsecured personal loan. Can you refi the personal loan with a mortgage and thus make the interest deductible? don't think so. for the interest to be qualified residence interest (deductible as mortgage interest) the loan must acquisition debt - debt incurred to acquire, construct or substantially improve your main or second home. paying off a personal home. paying off a personal loan would not be acquisition debt.
