If you had sold the first home with 500k equity to buy the second home, your loan isn't going to be as high as someone buying their first with a 20% deposit if they're competing for the same home of the value of 700k. I also know for a fact that banks ask you what assets you have when you take out a loan, so they do take it into consideration, the last loan I had they actually listed it on my preapproval.
Banks ask you what assets you have so they can work out your debt/equity and debt/income ratios. They need to know if you go bad, whether they can they take you for more than just the house. to recover any shortfalls. And they do. Trust me. Also to use as a basis for their investigations into your financial position. ie, did you disclose everything? If you didnt, theyl ask you about it and if you lie and they know otherwise, youre going on a fraud register every lender has access to and you wont get shit for years. It's ultimately to determine what your final position would be in a worst case scenario. This is part of assessing the credit or lending risk. They also use this information to cross check some of your claims - ie how much super you have based on age and occupation/industry can tell the bank whether you're bullshitting them about other aspects of your income and employment history. If you have more assets than your profile suggests you should, you may be flagged for a bit of a please explain (e.g. how as a 25 year old part time barista you own 7 homes, a ferari and a watch collection worth 120k is kind of a red flag). The loan may not be higher in the example you gave, but the bank sure as shit wont give you a 200k loan if you cant pay a 200k loan at todays stressed rate on the basis that you passed an assessment 5 years ago at a different stressed rate but now you now have assets.
Banks have to abide by various responsible lending obligations that factor in shit today that they didn't have to 5-10 years ago. If you don't meet the criteria, they wont give you a cent even if you think you can pay it or have been paying it for the last 10 years.
Someone with a 140k deposit and no assets with a high disposable income after all expenses that meets the stressed rate will get the loan no issue. Assets are not cashflow. If you cant pay the loan, you could own the Taj Mahal and it wouldn't make a difference.
House prices ATM are going into reverse, why pay top dollar unless you are paying high rent, in most cases best of waiting for another few months, most people would still need to pay their lease out anyway. It's up to the individual to do their own research to see what position they're in and see if it's going to benefit them but I wouldn't be telling anyone to buy when most values are going into reverse for the next few months.
people can do whatever they want. I could care less. But"Top dollar" is relative. Buying a house in a few months has zero guarantee to be cheaper or more affordable than it is today. The speed at which the rates have risen since april has reduced the borrowing capacity of many people at a rate that outstrips the drop in value across most of the market still. Basically you can only borrow less than before and what you can get for what you can borrow is less than what it was. AND you're paying more for it. Whats Top Dollar now? Every time that rate goes up, you can borrow less, and factoring in inflation into the expenses calculations, your income is assessed as less too. That trend is accelerating on the way to the bottom. That's not a desirable entry point unless you're cashed up/ excellent disposable income.
House prices in aggregate are going in reverse. Not all houses are losing value. I've explained this in a prior post. Buying now doesn't mean you HAVE to buy somewhere at a loss. But if you do, you're not making a loss in in the long term. If you're holding for +10 years, you're going to make money. The difference is is that now you have less competition. Buyers market and all. Auctions routinely passed in, motivated /stressed sellers, lots of stock etc.. Do you not recall that as little as a year ago and for several years prior to that, people were losing out on auctions week in week out to more cashed up buyers? First home owners deposits were being eroded faster than they could maintain them while they did the house search grind every weakened for years. When the market turns, that's going to be the same problem, but in an environment with higher rates. Higher rates, higher house prices, lower affordability. That's the basis for me saying if you can afford it now, then do it, because you may find what you can afford when the market turns is less than you can today.
What do i know? It's not like I have been doing this shit for 20 years or anything lol