HELP! Mortgage lenders for properties with a section 106 agreement/clause

Vins

Hi there,

My girlfriend and I would like to buy our first home. We've seen a new build in a perfect location and within our budget but it has a Section 106 clause. The clause is an affordable dwelling/local person type which, we qualify for but struggling to get a mortgage.

We have been accepted by RBS on a mortgage but the maximum they will lend is 80%. We simply can not afford a 20% deposit, we could stretch to 15% max. We have made contact with Nationwide, Halifax, other building societies, but all come back with the same answer.

Does anyone know of a specialist mortgage broker or lender who lends on 106 properties, but will lend 85% or even better, 90%.

We would use Help To Buy, but the developer isn't listed on the scheme. If anyone knows of any other schemes that could help, the information would be much appreciated.

kingstreet

You can't use HTB on a S106 property as it's considered to be two lots of Government money.

You'll need a knowledgeable specialist newbuild broker for this as your options are going to be extremely limited, to probably one lender depending on where you are in the country.

Vins

kingstreet wrote: »

You can't use HTB on a S106 property as it's considered to be two lots of Government money.

You'll need a knowledgeable specialist newbuild broker for this as your options are going to be extremely limited, to probably one lender depending on where you are in the country.

Thanks kingstreet. I've been looking into this for months, various mortgage lenders/brokers.

It seems we are hitting brick walls, the 106 policy really needs to change or at least be more recognised by lenders. This particular 106 does have a mortgagee in possession clause, it just needs an under writer to take a look at it in detail to realise it's not as high risk as they think and they can sell on the open market if ever we default on payments...

Rose101

Having the same problem - was initially told there were very few restrictions to the S106 but now have engaged a lawyer as there seems to be a few. I have been to safeguard financial services who specialize in new build with these S106 and they quoted me a mortgage from Halifax for 90% however the rate is a lot higher than expected and essentially looks like I maybe paying an extra £50-£80 per month than if I went for a house without this condition in. So in terms of buying the house it is affordable however because of the limited lenders the mortgage rates are not competitive and a worry when it comes to trying to renew after a fixed rate ends. I am about to engage some local mortgage brokers to see if they can offer a better rate but because of the S106 I think this is doubtful. If I cant get a better deal on the mortgage then I will most likely pull out of purchasing the house as it is too risky!

Vins

Rose101 wrote: »

Having the same problem - was initially told there were very few restrictions to the S106 but now have engaged a lawyer as there seems to be a few. I have been to safeguard financial services who specialize in new build with these S106 and they quoted me a mortgage from Halifax for 90% however the rate is a lot higher than expected and essentially looks like I maybe paying an extra £50-£80 per month than if I went for a house without this condition in. So in terms of buying the house it is affordable however because of the limited lenders the mortgage rates are not competitive and a worry when it comes to trying to renew after a fixed rate ends. I am about to engage some local mortgage brokers to see if they can offer a better rate but because of the S106 I think this is doubtful. If I cant get a better deal on the mortgage then I will most likely pull out of purchasing the house as it is too risky!

Thanks Rose, I will give Safeguard a try.

Can I ask where the one you're looking at is located and the amount? Is your 106 an affordable dwelling type?

Rose101

It is an affordable house on the S106 scheme so it is discounted to 80% of the market value - the discounted price is 120k, but I would own the house just with a clause in the contract for the S106. I am currently looking at a development in the North East and waiting to hear back from a solicitor on what other conditions are in the 106 for selling it on (such as having to offer to the council first, local area etc.) as I was originally only told that it was restricted to a maximum of 60k in earnings. The conditions don't concern me that much as I was planning to live in the house long term, it is more the mortgage situation and the fact only a couple of the high street lenders will take these on. Will keep investigating though - let me know how you get on.

Verix

I'm pretty sure you can do HTB1 and S106 but would depend on the specifics of the S106 agreement. If I remember rightly two lenders spring to mind that can consider it.

Not really much help to you OP but there definitely are lenders out there. I'm surprised the builder wasn't able to point you in the direction of a competent broker?

Vins

Thank you for the answers. The developer is useless to be honest and I feel they are trying not to advertise or sell the properties, in hope they can get the 106 removed and sell on the open market..

The system and 106 is so flawed, councils put the restriction on to help local people buy, local people can't get the mortgages, the houses don't sell so, the builder can apply to get the 106 taken off, ultimately leaving no homes Affordable to local people...

It's a catch 22.

kingstreet

Verix wrote: »

I'm pretty sure you can do HTB1 and S106 but would depend on the specifics of the S106 agreement. If I remember rightly two lenders spring to mind that can consider it.

Not really much help to you OP but there definitely are lenders out there. I'm surprised the builder wasn't able to point you in the direction of a competent broker?

When we approached HTB Wales for one of our builders offering S106 discounts in Powys, we were rebuffed.

Haven't tried it in England TBH, but knowing you can't combine Shared Ownership with HTB gave us a good idea based on what Orbit told us.

Vins

kingstreet wrote: »

When we approached HTB Wales for one of our builders offering S106 discounts in Powys, we were rebuffed.

Haven't tried it in England TBH, but knowing you can't combine Shared Ownership with HTB gave us a good idea based on what Orbit told us.

Thanks again, we can't use HTB as the builder isn't listed on the scheme.