For the purposes of figuring your deduction amount, you do not count months you had no mortgage as 0 in the average. There are three acceptable methods for determining this balance as outlined in Publication 936.
These options include using the average of first and last balance, the interest paid divided by the interest rate method, or the statements provided by your lender. The last method discusses treating a balance as 0 - but only when the mortgage loan exists but isn't secured by by your home. Otherwise, the months that there was no loan are not used in the calculation (for example if you have no mortgage and no home for two months of the year, then you take your balances each month that you do have a mortgage, and divide by 10, rather than 12 - or whatever number applies in your case.)
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