Bzzzzzt! Wrong answer. If you have a CD (not in an IRA) you have to pay taxes on the interest. Thus at that same 35% tax bracket, the 3% interest is only worth 1.95%. Now compare that to the 3.3% effective after deduction rate for the mortgage.
Yes, wrong answer. Under only the right conditions does the tax on your CD interest get canceled by the tax break on the mortgage interest you pay.
I got screwed in 2007 from this. Other capital gains pushed me into a bracket where my mortgage interest deductability got seriously reduced. So I pay taxes on the CD interest and did not recoup it on the mortgage side.