How the expanded Home Guarantee Scheme works

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

Yesterday Mr Morrison announced that the price caps on homes for the scheme will be lifted across almost the entire nation.

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

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

More Australians than ever will be able to purchase a first home with as little as a five per cent deposit. (Supplied)

What is the First Home Loan Deposit Scheme?

It’s typically recommended that in order to avoid paying Lenders Mortgage Insurance (or LMI) an aspiring homeowner should have 20 per cent of a property’s value as a deposit.

Given Australia’s property prices have boomed more than the price of a single deposit in one year, the government has recognised that the hardest part of buying a property is saving for the deposit.

The First Home Loan Deposit Scheme allows up to 50,000 first home buyers to buy with as little as 5 per cent deposit, with the government acting as a guarantor for the remaining 15 per cent so first-timers don’t have to pay LMI.

First home buyers can now buy a home up to $900,000 with as little as a five per cent deposit. (Flavio Brancaleone)

There’s no real “gotcha” catch to the scheme – but it is limited. The scheme is limited to the amount of people who can do it, and the value of the property they wish to buy.

The government won’t allow first-timers to buy with a 5 per cent deposit of a $10 million home.

So how expensive a property can I buy under the scheme?

It depends on where you live.

From July 1 this year the price caps for capital cities and major regional 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 lifted to $750,000, the Northern Territory will be lifted to $600,000 and Jervis Bay and Christmas Island will stay at $550,000 and $400,000 respectively.

The full table and changes can be seen below:


Won’t this see young first home buyers getting in over their heads on massive loans?

To participate, borrowers will still have to meet the usual loan and repayment assessments from their financial institutions.

This ensures that home buyers are protected against entering into a loan arrangement that could result in substantial hardship.

It is effectively shortening the home loan deposit saving period by up to a decade.

Aussie house prices have grown more than the cost of a 20 per cent deposit in one year alone. (James Alcock/NINE MEDIA)

How do I apply or find out if I am eligible?

Those interested in the scheme can apply via their lender or mortgage broker.

The NHFIC does not accept applications directly and does not use a “waiting list” for the scheme.

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The information provided on this website is general in 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 appropriateness of the information having regard to your objectives, financial situation and needs.

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