Suppose that my current mortgage balance is $150K.
Then I do a cash out refinance of $300K on March 31.
I recognize that interest payments are now broken up into
- Home acquisition debt (150K) 50%
- Deductible home equity debt (100K) 33%
- Non-deductible home equity debt (50K) 17%
Now hypothetically on April 1, I pay off $50K of the loan.
Does all of this get applied to the non-deductible part, which is what I want,
- Home acquisition debt (150K)
- Deductible home equity debt (100K)
or does this prepayment have to be proportionally applied to all 3 categories so that my new balances would be
- Home acquisition debt (125K) 50%
- Deductible home equity debt (83K) 33%
- Non-deductible home equity debt (42K) 17%
Thanks in advance