In year 1, Kris purchased a new home for $400,000 by making a down payment of $300,000

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In year 1, Kris purchased a new home for $400,000 by making a down payment of $300,000 and financing the remaining $100,000 with a loan, secured by the residence, at 6 percent. As of January 1, year 4, the outstanding balance on the loan was $80,000. On January 1, year 4, when his home was worth $480,000, Kris refinanced the home by taking out a $240,000 mortgage at 5 percent. With the loan proceeds, he paid off the $80,000 balance of the existing mortgage and used the remainder for purposes unrelated to the home. During year 4, he made interest-only payments on the new loan of $7,500. What amount of the $7,500 interest expense on the new loan can Kris deduct in year 4 on the new mortgage as home-related interest expense?