I am a US citizen living outside the US, and I have a mortgage. Am I eligible for Home mortgage interest deduction?
The definition of residence qualifying for the interest exemption is in Sec. 121 (the interest deduction itself is discussed in Sec. 163). From my reading of that section, there's nothing to prevent you from taking the deduction.
Keep in mind that since you're not going to be having 1098s from your foreign bank, you'll need to provide proper documentation of the interest paid throughout the year, and also handle the currency conversions.
There's also a discussion on how currency fluctuations affect your mortgage treatment for tax purposes. Some people claim that if the total principle paid in US Dollars is less than the original loan in US Dollars when you pay off the mortgage, the difference (in US Dollars) is considered income to you, even if in your home currency you paid off the loan in full. I disagree with this interpretation, but I'm not a licensed tax professional. Talk to one.