You will deduct interest income depending on situation.
If that is your investment property - report deduction
on schedule A line 14 - http://www.irs.gov/pub/irs-pdf/f1040sa.pdf
There is no form to send to your parents. Generally interest income is reported on form 1099INT - however this form is only used by banks and financial institutions - not by private persons. You may simply send a letter indicating the amount of interest paid during a year.
If that is your personal home - and if the property is used as a collateral - report deduction on schedule A line 11 - in this case - you need to report the name of the person, address and tax ID. If that is a case - the interest would be taxable to your parents.
If that is your rental property - report interest income deduction on schedule E line 13 - http://www.irs.gov/pub/irs-pdf/f1040se.pdf
If the property is used as a collateral - line 12
If that is a business property - report interest income deduction on schedule C line 16b - http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
If the property is used as a collateral - line 16a
So specifics mainly depends on your situation - how the property is used and if the property is used as a collateral or not.
Let me know if you need any help.