Be aware that in order to deduct the Home Mortgage Interest, the loan needs to be secured by the home. Since you combined the loans, only the portion attributed to the house that secures the loan counts.
For example, say you bought a house for 200,000 and a second for 100,000.
When you have a balance of 150,00 and 75,000 the first house is worth more, so you take a new mortgage out for 225,000 on the first house and pay off the original 2 loans.
You can only claim interest on part of your new loan. The new loan is on your first home which you paid 200,000 for, but only had a balance of 150,000 when you refinanced; Therefore the amount of debt you can claim interest on for that loan is 150,000.
The interest on the 75,000 is not deductible because it is not on a loan secured by the second house.
In this example, only 67% of the interest is considered Home Mortgage Interest.
According to the IRS:
“Refinanced home acquisition debt.
Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Any additional debt not used to buy, build, or substantially improve a qualified home isn't home acquisition debt.”
IRS Pub 936
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