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Unlocking Your Options for a Section 106 Mortgage
Are you considering purchasing a property with a Section 106 agreement and feeling overwhelmed by the complexities?
Fear not!
In this article, we will demystify Section 106 mortgages and guide you through the entire process, from understanding the role of local authorities and covenant restrictions to navigating mortgage options and legal considerations. Get ready to unlock your options for a Section 106 mortgage and secure your dream home.
Short Summary
- It is important to understand the role of local authorities, covenant restrictions, and mortgage options when considering a Section 106 mortgage.
- Working with experienced professionals such as knowledgeable mortgage advisors and legal advisors can help navigate the application process for Section 106 mortgages.
Understanding Section 106 Mortgages
Section 106 agreements are legal documents that often accompany planning permission for property developments. They include various planning obligations for developers, such as providing affordable housing and infrastructure improvements for the local community. However, these agreements also come with restrictive covenants, which can impact property sales and mortgage eligibility.
To secure a mortgage for a Section 106 property, it’s essential to understand the role of local authorities, covenant restrictions, and how they influence your mortgage options. Let’s delve deeper into these aspects.
The Role of Local Authorities
Local authorities play a critical role in the creation and implementation of Section 106 agreements.
They collaborate with developers to set the conditions and requirements for obtaining planning permissions, which often include affordable housing provisions, infrastructure improvements, and community benefits. To ensure a local connection for residents, local authorities work closely with lenders to guarantee that the terms of the Section 106 agreement are appropriate for mortgage purposes.
By fostering cooperation between developers, lenders, and the community, local authorities contribute to the creation of sustainable, well-connected neighbourhoods.
Covenant Restrictions
Covenant restrictions in Section 106 agreements can significantly impact property sales and mortgage options. These restrictions may include provisions regarding:
- The sale of the property
- Occupancy limitations
- Resale price covenants
- Salary restrictions
Consequently, it’s important to understand the covenant restrictions associated with a Section 106 property to ensure its mortgageability and resale value.
A cascade mechanism within the Section 106 agreement allows for a gradual relaxation of restrictions if they impede property sales in the open market. Mortgage brokers experienced in Section 106 properties can help borrowers navigate this process, ensuring that the property remains an attractive and viable option for potential buyers.
Mortgage Options for Section 106 Properties
When it comes to financing a Section 106 property, there are two main avenues: mainstream lenders and specialist lenders. Both options come with their own criteria and restrictions, influenced by the covenant restrictions of the Section 106 agreement. Understanding the differences between these lenders is crucial for securing a mortgage that suits your needs.
Let’s explore the mortgage options provided by mainstream and specialist lenders, and how they cater to the unique requirements of Section 106 properties.
Mainstream Lenders
Mainstream lenders, such as banks and building societies, may offer mortgages for Section 106 properties. However, they often have more stringent requirements due to covenant restrictions. This can make it difficult for some borrowers to secure a mortgage from a mainstream lender.
If you’re having difficulty obtaining a mortgage from a mainstream lender, don’t be discouraged. Working with an experienced mortgage advisor will allow to explore the option of specialist lenders.
Specialist Lenders
There are specialist lenders that provide tailored mortgage options for Section 106 properties. They have an in-depth understanding of the unique requirements and restrictions of these properties, allowing them to offer financing solutions that meet the needs of buyers.
Specialist lenders often have more flexible lending criteria compared to mainstream lenders, making it easier for borrowers to secure a mortgage.
When applying for a Section 106 mortgage with a specialist lender, the process is similar to that of a mainstream lender. You’ll need to provide the necessary documentation, such as proof of income and credit history, and the lender will evaluate your ability to repay the loan. However, it’s essential to research and compare specialist lenders’ terms and conditions before applying - our team can help with this.
Navigating the Mortgage Application Process
Embarking on the mortgage application process for a Section 106 property can be a daunting experience. To alleviate stress and ensure a smooth process, work with an experienced mortgage broker who can guide you through the intricacies of Section 106 agreements.
Deposit Requirements
Due to the restrictive covenants of Section 106 agreements, deposit requirements from mainstream lender are typically higher, around 20%. You may find that specialist lenders require a smaller deposit.
Working with an Independent Mortgage Advisor
Workking with an experienced mortgage advisors can help immensely in the Section 106 mortgage application process. They assist borrowers in locating lenders who offer mortgages for Section 106 properties and provide guidance on navigating the specific requirements and conditions associated with these agreements.
By working with expert mortgage brokers, you can access a wide range of mortgage options tailored to your needs, boosting your chances of approval.
Legal Considerations for Section 106 Mortgages
When considering a Section 106 mortgage, it’s important to be aware of the legal considerations involved. These include seeking independent legal advice to understand the implications of the Section 106 agreement on property sales and mortgages, as well as involving estate agents in the process to ensure compliance with covenant restrictions.
Let’s explore these legal considerations and their significance in the Section 106 mortgage application process.
Independent Legal Advice
Independent legal advice is helpful in understanding the implications of Section 106 agreements on property sales and mortgages.
A legal professional can help you navigate the complex conditions and obligations of the agreement, helping you to gain a comprehensive understanding of the legal aspects of purchasing a Section 106 property and safeguard your interests.
Selling and Renting Section 106 Properties
Selling and renting Section 106 properties present unique challenges and requirements due to the restrictive covenants and obligations associated with these properties.
Selling Your Section 106 Property
When selling a Section 106 property, you must comply with covenant restrictions and often involve local authorities in the process.
Renting Out Your Section 106 Property
Renting out a Section 106 property may require council permission, and letting out the property is often prohibited under the provisions of the agreement. Additionally, Section 106 properties typically cannot be used for holiday lets or short-term rentals.
Summary
In conclusion, understanding the intricacies of Section 106 mortgages is crucial for securing a mortgage and navigating the property market.
Section 106 agreements refer to planning obligations imposed on property developments by local planning authorities.
These obligations can significantly impact the process of buying, selling, and maintaining a property. The agreements are essentially restrictive covenants set by the local council, with the intent of regulating the use and development of land in specific ways. It's important to note that the restrictions and obligations under Section 106 agreements can vary significantly based on the specifics of the development and the requirements of the local planning authority.
Mortgage brokers play a crucial role in navigating these agreements when purchasing a property.
They offer expert advice and help buyers understand the implications of Section 106 on their potential purchase. Consulting with a knowledgeable mortgage broker is advisable to fully grasp the intricacies of the agreement and its impact on the mortgage process.
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Frequently Asked Questions
Can I buy a house with a 106 agreement?
- You can buy a house with a 106 agreement, as long as you fulfil the necessary criteria.
- However, bear in mind that some lenders may be put off by the extra complexity it involves.
What is Section 106?
- A Section 106 agreement is a legally binding obligation between a local planning authority and a landowner, as part of the granting of planning permission. It is governed by Section 106 of the Town and Country Planning Act 1990.
- The agreement is used to ensure that the development of a site is in line with the local authority’s planning policies. It can include a range of conditions, such as the provision of affordable housing, and the payment of a financial contribution towards affordable housing.
What are the main differences between mainstream and specialist lenders for Section 106 mortgages?
- Mainstream lenders typically have stricter requirements due to covenant restrictions, while specialist lenders offer more flexible lending criteria and have an in-depth understanding of Section 106 mortgages.
- These lenders are often more willing to consider applications from borrowers who may not meet the criteria of mainstream lenders. They can also provide more tailored solutions to meet the needs of the borrower.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
