High debt to income ratio preventing refinancing, but large amount of cash in offset

Hi PCers,

I have a high debt-to-income ratio (> 10) which prevents me from refinancing my loans easily. In a year's time, I should have enough cash in the offset to pay down my PPOR loan entirely. My PPOR loan is about 40% of my debt with the other 60% being due to IP debt against 4 properties.

However, I'm reluctant to pay down my PPOR loan in case it becomes an IP someday.

Has anyone got any suggestions for someone who is stuck with being able to refinance their loans? Just wanted to get some ideas that I might not have thought of, before I approach my broker.

My rationale for refinancing is because one of our loans is with a non-bank lender and at a high interest rate (4+%). I'd also like the freedom to switch some of my other loans to banks that offer full offset against fixed loans.

I have already followed Terry's strategy (Strategy: Don’t Keep Large Sums in Offset Accounts) to minimise the interest I'm paying on the non-bank loan, but it bothers me that I'm basically unable to refinance unless I can improve the income/serviceability situation somehow... yet I have a decent amount in the offset but that's not taken into account at all.

Thanks all!

 

Sometimes it comes down to a choice of whether to pay down the owner OCC loan and save interest now by refinancing or not paying it down just in case.

Do you intend to buy a new main residence?

 

Thanks Terry. We are aiming for early retirement and hope to have the flexibility to perform a seachange/treechange in the next 5 - 10 years - could be even earlier if working from home becomes a common theme post-Covid. In such a case, it would make sense to rent out our current PPOR as we could never get back into the Sydney market if we sold it.