The easiest way to show this would be for the interest to be deducted on schedule A
and not part of the schedule C
. Since the loan was made to you and not the business, it would not be best for the business to reflect the expense. In addition, by the business capturing the expense you would be decreasing the self employment tax, which you don't want to do.
Below is the definition of Home Equity Debt per the IRS
and since your schedule C company doesn't own the home used as collateral, they can't justify the interest expense.
Home equity debt is a mortgage you took out after October 13, 1987, that:
Does not qualify as home acquisition debt or as grandfathered debt, and
Is secured by your qualified home.
Drawing up a loan to the business from the family would then force the family to recognize interest income
on that loan, which I don't think you want to do.
The expenses paid to get the HEL would be deducted on schedule A as well if they pertain to points. Since the loan was not to improve your home, you have to amortize the expense over the life of the loan. So if the expense was $3,000 and the loan was for 30 years, you would deduct $100 a year.
Below is a link to the IRS that has some information on interest deductions
on mortgages and their related expenses, which you might find informative.
The fact that this house is included in a trust doesn't impact this answer.
Let me know if you have any questions before you rate
my answer. A positive rating is what I strive for.