Owner financing questions

I am considering purchasing my sister's home on an owner financing basis. My sister has a mortgage on the home which will not be paid off when we take possession of the property. The way we are structuring the agreement is such that we will make monthly payments in the amount of her current monthly mortgage payment. The principal that is paid down (and any market value equity increase through the contract period) will be considered as our "down payment" at such time as I am in a position to take a mortgage in my own name. My questions are 1) is the Contract for Deed technically a mortgage and would this not cause conflict with the current holder of her mortgage? 2) who benefits from the interest deduction for tax purposes? 3) do I have to have a homeowner's insurance policy or a renters policy?