I can see some potential traps here.
If you want to be able to claim a deduction on your U.S. taxes for the interest that you pay to your friend, the loan agreement has to meet certain requirements. It has to be an actual mortgage, secured by your home, not just a personal loan. And the mortgage has to be properly recorded.
Whether it's a mortgage or a personal loan, you and your friend have to have a payment schedule showing how much of each payment is interest. She will have to report the interest that you pay as income on her U.S. tax return, even if you cannot deduct the interest on your tax return.
Also, when your friend pays off your existing mortgage, for your own protection you have to make sure that the satisfaction of the existing mortgage is properly recorded, and that you get a document from the mortgage company saying that it has been paid off.
You should consult a local lawyer and a tax professional about these issues. This is not a do-it-yourself project.
