Rhakima is a 51-year old, divorced female living in Oklahoma. She purchased her primary residence 19 years ago for $200,000 and has lived there ever since. She made payments on her mortgage during that time and reduced her mortgage balance to $60,000. Last year (2020), Rhakima took out a home equity loan of $100,000. She used $75,000 to have a 3rd bedroom built on as an addition to her residence. She used the other $25,000 to pay off some credit card debt she had accumulated.

Write a memo to the files explaining the proper tax treatment of the interest on the first mortgage and the interest on the home equity line of credit, assuming Rhakima itemizes deductions on Schedule A.