perhaps becuase the interest rates are not the same.
say total balance is $1,000,000
so the deductible amount would be 750/1000 or 75% of the total interest paid (both residences)
say on principal residence the debt is $800K and you paid $40K in interest
so the deduction your way would be 750/800*40k= 37500
if the other mortgage was $200K and you paid $12K in interest the correct calculation would be
750/1000 * (40K +12K) = 75% of 52K or $39K
so in this situation would you prefer a $37,500 deduction or a $39,000 deduction? it could work the other way also. however , temp reg. 1.163-10T(o)(5)(i) would allow you to treat the either mortgage as unsecured and thus would not enter into the mortgage interest limitation computation with one big caveat.
(5) Election to treat debt as not secured by a qualified residence -
(i) In general. For purposes of this section, a taxpayer may elect to treat any debt that is secured by a qualified residence as not secured by the qualified residence. An election made under this paragraph shall be effective for the taxable year for which the election is made and for all subsequent taxable years unless revoked with the consent of the Commissioner.
