We need a bit more information.
When you say that home 2 was purchased using the proceeds from BOTH mortgages, the interest on Mortgage 1 may not be allowed at all.
You cannot borrow on one house to purchase another and claim the interest.
The interest paid on the Mortgage on home 1 can only be claimed if the loan was taken to purchase (or build or improve) THAT #1 home.
If you owned Home 1 and then took out a mortgage (so that you could buy house #2) the interest is not qualified.
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