Buying & Selling a House With a Section 106 Agreement

Section 106 properties can be harder to mortgage due to restrictions on sale, but the good news is there are at least 38 lenders that consider them, including 4 specialists. We’ve helped hundreds of customers with a Section 106 property, and 8 of our expert team are dedicated to this type of mortgage. We guarantee to get your mortgage approved and find you the best deal. If we can’t and someone else does, we’ll give you £100!*

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Home Property Types Buying & Selling A House With A Section 106 Agreement
Pete Mugleston

Author: Pete Mugleston

CeMAP Mortgage Advisor, MD

Nathan Porter

Reviewed by: Nathan Porter

Independent Mortgage Advisor

Updated: September 22, 2025

Quick Summary

You can absolutely get a mortgage on section 106 property – depending on the details of any restrictions, 38 lenders can consider section 106 property, 4 lenders are specialists in it.

If you’re reading this, you may already know what a Section 106 (s106) property is and need help getting the mortgage sorted. At a high level, they are properties that come with certain restrictions designed to keep homes affordable for local residents. These might include limits on how much you can resell the property for, rules about who can live there, or specific eligibility requirements for buyers.

Lenders can sometimes see s106 properties as a bit higher risk because the restrictions make them harder to sell. It’s always a good idea to get legal advice too, so you fully understand what you can and can’t do with the property before you commit.

It can be tricky finding the right lender that accepts both the property and you as an applicant (factoring in your income, affordability, and credit history etc) – this is why we’re here!

Can you get a mortgage on a Section 106 property?

Yes, it’s possible. Plenty of lenders are willing to loan you the money to buy this type of property, although which is right for you will depend on the mortgage provider’s criteria and the exact wording of the covenant.

One main benefit of buying a Section 106 property is that it’s often available at a price below market value. However, this can make the process slightly longer and a little more complicated, which puts off some lenders. This is why some borrowers face difficulty finding a mortgage, particularly if they go it alone or just stick to mainstream lenders.

A Section 106 agreement is a legal contract between a property developer and the local planning authority designed to ensure new developments benefit the community. It’s named after Section 106 of the Town and Country Planning Act 1990, which allows councils to impose specific conditions on a property.

A common use of a Section 106 agreement is to make housing more affordable for local residents or key workers.

These conditions may include restrictions on who can purchase the property, limits on resale prices, or requirements to sell the property at a discounted rate.

Section 106 covenants often remain in effect indefinitely. However, property owners can apply to have them modified or discharged after five years.

You would first need to seek permission from the local council authority beforehand. If their approval is given, then you can rent out the property for a temporary period only. You will not be allowed to rent out a 106 property as a holiday let, AirBnB, etc.

When selling a property with a Section 106, you will need to inform your estate agent and get in touch with the local authority. The covenant should be with your homeowner documents, but if you can’t find it, don’t worry. The solicitor you used when buying the property should have a copy.

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Possible restrictions

Restrictions on a Section 106 property are usually intended to ensure it’s sold to an appropriate buyer, such as local residents or key workers, especially in areas with high property prices.

Typically, this is for local families or key workers in areas where property prices are prohibitively high, but it can relate to other property types, such as holiday homes that can only be occupied for a certain amount of time each year or can’t be used for residential purposes.

Another possible caveat is a ‘resale price covenant’ that states a property must be sold at a discount if bought by a first-time buyer.

Restrictions are agreed locally, not nationally, which means they are handled differently in different parts of the country. For this reason, some mortgage providers place a blanket ban on this type of mortgage.

Below are the three main requirements you’ll need to meet to be able to buy a Section 106 property:

  • Locality: You’ll need to have lived in the local area for at least three years. If you don’t meet this criteria, you’ll need to have a stable job or have a job offer of over 16 hours a week in the local area.
  • Housing need: How urgently you need the house will affect whether you’re eligible to buy a Section 106 property or not. The seller will assess whether you can purchase the house based on your income, savings, wages and any equity in properties you already have.
  • Property use: A Section 106 agreement will require you to use the property as your principal residence. If you intend to use the property as a buy-to-let or second home, you won’t be able to purchase it.

Pros and cons of buying a Section 106 property

If you’re considering applying for a mortgage on a Section 106 property, it’s best to think about the benefits and drawbacks of doing so before you make a decision.

We’ve listed some of the most common pros and cons below:

Pros

  • Affordable purchase price: Section 106 properties are typically sold below market value at a reduced price. This makes them more accessible to first-time buyers or local residents in high-cost areas.
  • Support for local communities: These properties are often reserved for locals or key workers, which can help foster stable, close-knit communities by allowing people to live near work or family.
  • Investment potential: A Section 106 property can still appreciate in value over time, but this is usually slower due to resale restrictions.
  • Access to mainstream lending: While some mortgage providers may have restrictions, many mainstream lenders are open to financing Section 106 properties, especially with the help of a specialist broker.

Cons

  • Resale restrictions: The covenant may limit who can buy the property in the future, which might make it harder to sell and impact the property’s market appeal.
  • Limited buyer pool: Restrictions on who can buy (such as local residents only or those meeting certain income criteria) may narrow the pool of potential buyers, affecting resale flexibility.
  • Potential higher deposit: Some lenders require a larger deposit (often 20% or more of the discounted price) due to resale limitations, which can raise upfront costs.
  • Constraints on letting out: Renting out a Section 106 property is often restricted or subject to local authority approval, limiting options for using the property as an investment or rental.

What are the deposit requirements?

Those who do accept applications may insist on a bigger-than-average deposit or higher interest rate to compensate for the additional work involved. However, some non-mainstream lenders specialise in this type of property and don’t impose such restrictions.

Some providers are put off by covenants with no time limit as they worry about the resale value. To address potential resale issues, many covenants include a ‘cascade mechanism’ allowing restrictions to be gradually relaxed if they hinder the sale.

In most cases, a high deposit of at least 20% of the property’s discounted valuation (as determined by the Section 106 covenant) is required.

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How a broker can help you get approved

Section 106 legislation can appear complicated to borrowers, but it is part of what many mortgage brokers do day in and day out.

We work with mortgage brokers who specialise in this type of mortgage and will be able to quickly review the covenant on the home you’re buying and identify the most suitable lender.

If you get in touch, we’ll arrange for a broker who has experience dealing with mortgages for this particular type of property to contact you directly.

Which lenders offer mortgages on this property type?

Mainstream lenders that may potentially lend on Section 106 properties vary but sometimes include:

  • Halifax
  • Nationwide
  • Santander (applications only accepted via a broker)

There are also several other banks, building societies and specialist lenders that will accept applications.

Each lender has their own criteria but, broadly speaking, the following restrictions included in the covenant should not prevent you from getting a mortgage:

  • Salary restrictions
  • Restricted percentage below market value
  • Limitations on the category of occupant

Some lenders will approve a maximum loan amount of £250,000. Most will not accept applications for property tied to agriculture or where occupancy is restricted to maximum time limits throughout the year.

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Get matched with a Section 106 property specialist

The best route to the best deal on a mortgage for a Section 106 property is to speak to an independent expert.

If you’re considering buying a property with a restrictive covenant, our broker matching service will pair you with a Section 106 property specialist to ensure you get the right rate without hassle.

Call today on 0330 818 7026 or enquire online to arrange a free, no-obligation chat with an expert.

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Pete Mugleston

CeMAP Mortgage Advisor, MD

Pete, a CeMAP-qualified mortgage advisor and an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete successfully went the extra mile to find mortgages for people whom many others considered lost...

Pete, a CeMAP-qualified mortgage advisor and an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete successfully went the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained and his love of helping people reach their goals led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

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