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You don't send a report to your mortgage holder because 1099's are not sent to corporations (among others). See Instructions for Form 1099-INT for who does and does not receive this form.

And - 1099's are required to be sent only in connection with a trade or business, that's why you don't send your mortgage company a 1099 and why they DO send you a 1098 (loans are <u>their</u> business).

As to your parents' interest expense, if they get a second or an equity line of credit to get the $ to loan to you, then it would be deductible as Qualified Home Mortgage Interest (QHMI).

If they are simply getting an unsecured loan, and if you are paying them interest that they are reporting on their Schedule B as interest income, I would advise them to deduct the interest expense on Schedule A as investment interest expense.
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