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Buying a section 106 property

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 6, 2023

Buying a section 106 property – What are your options?

Section 106 property refers to a restrictive clause with restrictions on how the property can be purchased or sold. The local authority and relevant parties have made these restrictions.

Although this sounds complicated, many mainstream lenders offer this mortgage, otherwise known as a covenant mortgage, so getting one should not be difficult.

We’ll be discussing how Section 106 legislation affects property purchases. And why speaking with a mortgage broker can help make the process smooth and easy.

Enquire below to speak with our mortgage company to discuss the affordable housing association and section 106 agreement.

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Is it possible to get a mortgage for a Section 106-owned property?

Yes, it’s possible. You can find many lenders who will lend you money to purchase an affordable home property. However, which lender is best for you depends on your criteria and the specific wording of the covenant.

Section 106 properties are often purchased at a lower market resale value. This may put off lenders as it can take longer and make things more difficult. Many borrowers have difficulty finding mortgage financing, mainly if they do not stick with mainstream lenders or go alone.

There could be restrictions.

Section 106 property restrictions are often enforced to ensure that the right buyer is found whenever possible.

This is typically for families and key workers living in areas with prohibitively high property prices. However, it could also apply to other types of property, such as holiday houses that can only be occupied for a limited time each year or cannot be used for residential purposes.

A’resale pricing covenant’ states that a property must not be sold at a discounted price if purchased by a first-time buyer.

Restrictions are set locally and not nationally. This means that they can be handled in different areas of the country. Some mortgage providers have a blanket ban on this type of mortgage.

What are the requirements for a deposit?

Accepting applications may require a higher than average deposit or higher interest rate to make up for the extra work. Non-mainstream lenders can lend money for this type of property, and they don’t have such restrictions.

Covenants that have no time limit can be a deterrent to providers who worry about the resale price. Many covenants have a ‘cascade system’ that allows for a gradual relaxation of restrictions if the restriction causes problems in selling the home.

A deposit of at most 20% (of Section 106) is required in most cases.

How a broker can help with your approval

Although section 106 legislation may seem complicated to borrowers, it is a part of what many mortgage brokers do daily.

We have mortgage brokers who specialise in this type of mortgage. They will quickly review the covenants on your home and help you choose the best lender.

Get in touch, and we’ll contact you to arrange for a mortgage broker with experience dealing with this type of property.

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What lenders are available to mortgage this type of property?

Several mainstream lenders will lend to Section 106 properties:

  • Halifax
  • All over the country
  • Santander (applications are only accepted through a broker).

You can apply to other banks, building societies, and specialist lenders.

Although each lender will have its lender criteria, these restrictions should not stop you from getting a loan.

  • Salary restrictions
  • Restricted percentage below the market value
  • There are limitations on the type of occupant

Lenders will accept loans up to a restricted price of £250,000. Many lenders will not approve loans for properties tied to agriculture or where the owner is restricted in their occupancy to a maximum amount of time per year.


Match you with a Section 106 specialist property agent

Talking to an independent expert is the best way to get the best mortgage deal for a Section 106 property.

Our broker matching service pairs you with a Section 106 property specialist if you are interested in buying a property with a restrictive covenant. This will ensure that you get the best rate possible.

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After you find an affordable home, you can apply to us to determine if you are eligible to buy it. This Agreement is a legal document that places certain conditions on the land or property. This Agreement ensures that the property is affordable and sets the criteria for prospective buyers. Each property is different, but the main clauses of Section 106 are:

Local connection

This clause ensures that the property can only be purchased by those who have a connection to the locality. Section 106 gives a list of parishes. This defines the locality. These details can be obtained from the owner or by us if they are not clear.

There are many variations in the local connection criteria for section 106 agreements. Most will require that you have lived in the area for at least three consecutive years before applying. For more information about local connection requirements, please contact us.

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Housing is a necessity.

Affordable housing is available to those in need who cannot afford a home on an open market. Your household’s circumstances, income, savings, equity and wages, and potential mortgage are all factors we use to determine whether you qualify. To determine eligibility, we compare your household’s financial situation with a table of property values from independent property surveyors.

Use the property

You must make the property your sole or principal residence. It cannot be used for a second or holiday home.


Each property owner must adhere to the Section 106 Agreement throughout the life of the property. Each case is evaluated individually, and we refer to the Section 106 Agreement for the property of particular interest.

As such, the Section 106 Agreement has changed over time, and there are many variations among properties.



How about selling a Section 106-compliant house?

You must notify your estate agent and contact the local authorities if you are selling a Section 106 property. You should have the covenant with your homeowner’s legal document. If you don’t, don’t worry. A copy should be provided by the solicitor who represented you when you purchased the property.

Can I rent a Section 106 home?

Before renting the property, you will need permission from your local council. You can only rent the property temporarily if they approve. A 106 property cannot be rented out as a vacation let (AirBnB, etc.).

What length of time can a Section 106 Covenant remain in effect?

You can put it in place for an unlimited amount of time, but any person bound by it can request to have it modified or removed after five years.

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