You don't really "include costs in your housing allowance." You can exclude from taxable income a designated housing allowance, but you can't exclude more than the lesser of:
- your actual housing expenses
- the fair rental value of your home (what a landlord or real estate agent would charge to rent the same or similar home in the same neighborhood in the same condition, including furnishings and utilities)
And since the housing allowance much be designated in advance and in writing, if you find your expenses have increased, you can't claim an exclusion retroactively, you must go back to the church and ask to change the designation going forward.
I can't find any specific rule that if you refinance your mortgage and use some of the proceeds for other purposes, that would not count as a housing expense. The loan is still secured by the home and you could lose the home if you didn't make payments. The is no direct legal connection between the definition of "qualified mortgage interest" for the schedule A itemized deduction, and "qualified housing expense" for the clergy housing allowance. However, if the loan was very large, so that the payments exceeded the fair rental value of your home, that would be disallowed.
There is a bit more information here,
https://www.irs.gov/forms-pubs/about-publication-517
The best guide is here, you need a membership to download the resources, but your denomination may already have a blanket membership.
https://www.ecfa.org/Documents/HousingAllowanceWorksheets.pdf
https://www.ecfa.org/ProductDownload.aspx?ProductID=347
