Acquisition debt is debt that was used to buy, build, or substantially remodel your home. It doesn’t matter what form the acquisition debt is in.
For example, if you bought your home with a combination of conventional mortgage and HELOC, then that is all acquisition debt. Let’s say you bought your home for $100,000 with a $75,000 mortgage, a $20,000 HELOC, and $5000 cash down payment. You have $95,000 of acquisition debt. You pay that down to $90,000 over the first couple of years. Then you re-finance for $120,000. Only $90,000 is acquisition debt, unless you use the balance of the refinance to substantially remodel the home.
