How the Extended Home Guarantee Program Works

Prime Minister Scott Morrison has announced that from July 1 the government will dramatically increase the price caps currently imposed on the First Home Loan Deposit Scheme.

Yesterday Mr Morrison announced that house price caps for the scheme would be lifted across most of the country.

From July 1, the scheme will apply to homes worth up to $900,000 in Sydney and up to $800,000 in Melbourne, with increases in all states.

Still confused? Here’s what you need to know:

More Australians than ever will be able to buy a first home with as little as a five per cent down payment. (Provided)

What is Home Loan First Deposit System?

It is generally recommended that, to avoid paying lenders’ mortgage insurance (or LMI), an aspiring homeowner have 20% of a property’s value on deposit.

As property prices in Australia have soared more than the price of a single deposit in a year, the government has recognized that the hardest part of buying property is saving for the deposit.

The First Home Loan Deposit Scheme allows up to 50,000 first-time homebuyers to buy with as little as 5% down payment, with the government acting as guarantor for the remaining 15% so newcomers don’t don’t have to pay the IMT.

First-time home buyers can now buy a home for up to $900,000 with as little as 5% down. (Flavio Brancaleone)

There is no real “gotcha” trap in the scheme – but it is limited. The program is limited to the number of people who can do so and the value of the property they want to buy.

The government won’t allow newbies to buy a $10 million house with a 5% down payment.

So, at what price can I buy a property under the program?

It depends on where you live.

As of July 1 this year, price caps for regional capitals and major cities are as follows: NSW ($900,000), Victoria ($800,000), Queensland ($700,000), Western Australia ($600,000) $), South Australia ($600,000) and Tasmania ($600,000).

In the territories, the ACT will be increased to $750,000, the Northern Territory will be increased to $600,000 and Jervis Bay and Christmas Island will remain at $550,000 and $400,000 respectively.

The full table and changes can be viewed below:


Won’t that see young first-time home buyers get in over their heads with massive loans?

To participate, borrowers will still need to meet the standard loan and repayment assessments of their financial institutions.

This ensures homebuyers are protected against entering into a loan agreement that could result in significant hardship.

It effectively shortens the home loan deposit savings period by up to a decade.

Australian home prices have risen more than the cost of a 20% deposit in just one year. (James Alcock/NINE MEDIA)

How do I apply or know if I am eligible?

Those interested in the program can apply through their lender or mortgage broker.

The NHFIC does not accept applications directly or use a “waitlist” for the program.

Will Labor back the program if they win government?

Today, ALP Treasurer Jim Chalmers said he supports raising the price caps for the program.

“We’ve been very supportive of the government’s plan for the first door-to-door economy and have said for some time that we don’t think the caps are appropriate,” Mr Chalmers said.

“So to the extent that the caps are changed today, we welcome that. It’s obviously not the only part of a good and broad housing policy.

“We also have our social and affordable housing policy.”

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The information provided on this website is of a general nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website, you should consider the suitability of the information to your objectives, financial situation and needs.

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