No, you are not claiming the interest from both houses at the same time but you are applying the $750K limit to each. Please try to understand that the $750K limit applies to the total of all your mortgages. The average balance of $765K on House1 already exceeds $750K. So it's all used up and the remaining limit for House2 is $0. You don't get to deduct up to another $750K on House2.
