It means, if you refinanced, did you take any cash out?
If NO, then the answer is "Yes" it was used to purchase, build or improve the home BECAUSE the loan amount is the same, it is the remainder of what you borrowed to obtain the house. Only the interest rate may have changed which is not a concern.
If YES (you took out cash), then your loan amount has changed. If you had 90,000 left on the mortgage loan and you refinance to a 100,000 loan, well you just borrowed 10,000 more than you needed to stay in that home.
THEN the question becomes "What did you do with that additional 10,000?".
If you applied the 10,000 towards the house, (such as adding a room) then that 10,000 becomes part of the loan for the house and you can deduct ALL the interest on that loan. Then "Yes" used to purchase, build or improve".
If you applied that 10,000 to pay down credit cards or purchase a car, then NO, that 10,000 as not used to purchase, build or improve your home IN WHICH CASE the interest on that loan must be pro-rated between the original loan and the 10,000 cash.
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