Anyone with any experience of the "low cost housing" scheme (Section 106)

Orwell.G

I'd be interested to hear people's opinions on this scheme. I recently registered with the local council and was actually at the stage of putting in an offer on a home when a mortgage advisor told me that very few mortgage lenders are actually willing to offer mortgages under this scheme.

Very frustrating as the scheme is meant to be for "those who find it difficult to buy or rent a property on the open market" but it seems if you need a mortgage you will struggle.

I have also been warned that the restrictions under this scheme could cause all sorts of problems when you came to sell it on.

Regards

Orwell

kingstreet

As stated, anything which makes a sale post-repossession more difficult is going to make many lenders shy-away from S106 agreements.

As it effectively reduces the pool of potential buyers to only those with a tie to the area.

This will also affect your ability to sell later.

Orwell.G

Thanks for your reply! So the "low cost housing" scheme is a paradox. On the one hand you qualify for the scheme if you meet the (quite strict) requirements, but you will struggle to get a mortgage (or the mortgage lender will pull out at a later stage).

My concern for others is that they will get a mortgage in principle agreement, make an offer, pay money to solicitors etc. only to be told that they will not be given a mortgage due to section 106.

flyingember

A section 106 agreement is made between a developer and a local authority. It can cover a number of things including money for education, sports facilities, road improvements and affordable housing. The affordable housing may be in the form of houses to rent or to buy on shared ownership.

Thousands of homes have been provided in this way so there must be firms willing to lend on them. I think the Leeds BS is one. Rather than ask a broker perhaps you should discuss the matter with the organisation, usually a Housing Association, who will hold the remaining share. They may be able to point you in the right direction.

fe

kingstreet

A s106 agreement can also include sale only to those who have a tie to an area.

OP needs to clarify what EXACTLY the S106 says before formal decision to purchase should be made.

Judging from the OP's comments in the first post, this is about "locality," not the usual requirements placed on the builder in return for planning permission.

Lake district being the prime example of such cases.