Your debt is the principle part of your loan. It can be divided into acquisition debt and equity debt. In your case, it is mostly acquisition debt with a small amount of equity debt.
When you make a payment, part of it is interest, and part of it may go to escrow, and part of it will pay down your debt (balance). In the above calculations, the IRS allows you to assume that you are paying off your equity debt first. Do you actually know how much debt you have at any given month, you have to look at the principal balance on your mortgage statement.
