Ah yes, the actual mortgage value... the principal is definitely covered in the deduction of the interest... The interest definitely isn't literal income for the bank and they definitely don't pay taxes on income that they make.

Edit: Also there's caps on that value anyway...

However, there are mortgage deductions limits to be aware of: Loans taken out after December 15, 2017 – limit of $750,000 ($375,000 for married couples filing separately) Loans taken out on or before December 15, 2017 – $1 million ($500,000 for married couples filing separately)

With the prices of homes now... It's entirely possible you're completely fucked and paying on that interest anyway.