Cash out portion of second home refinance used to pay down primary residence mortgage

[fh54]

I did a cash out refinance of my second home and used the cash out amount to pay down my primary residence mortgage (so I could refinance my primary residence mortgage at conventional rates).  Is the refinanced second home mortgage fully deductible?

[Vanessa A]

No, it is not fully deductible.  Only the portion that was used to buy, build or substantially improve the home that secures the loan is deductible.  So if your second mortgage balance is now $100,000 and you used $33,000 to pay off your primary home, only the interest on the $67,000 is deductible.  The interest on the $33,000 would not be deductible since it was used for something other than the second home. 

[fh54]

Thank you for such a prompt and clear reply.  While it was not the answer I wanted, it was what I suspected.  In your example, if I now payoff the $33K cash out amount, will the interest after that point be fully deductible?

[DianeW777]

Yes, if the remaining loan amount was strictly used to buy, build or improve the home.