Deferred Payment Agreements: Using Your Home to Pay for Care

What a deferred payment agreement is

Under the Care Act 2014, councils in England must offer deferred payment agreements to people who meet the criteria. The council pays your care home fees and places a legal charge on your property. When the property is sold, the accumulated amount is repaid with interest.

It is a way of avoiding a forced, rushed sale of a family home, particularly where a spouse is unwell or the market is poor. It is a loan, not a grant, and the debt grows steadily, so it buys time rather than reducing the total cost.

Who is eligible

Broadly, you need to be moving into residential care, have capital other than your home below the upper threshold, and own a property that is not disregarded because a qualifying relative still lives in it. Councils have discretion to offer agreements outside the strict criteria.

The key point that surprises many families is that these agreements are for residential care. Care in your own home does not usually trigger them, because the home you live in is disregarded in the financial assessment for home care in the first place.

• Usually applies to residential or nursing home placements
• Requires a property with sufficient equity and no disqualifying occupier
• Other capital must be below the upper threshold
• Councils charge interest and set up or administration fees
• A contribution from income is normally still required

What it costs

Councils charge interest at a rate set nationally and reviewed twice a year, plus administration and legal fees for setting up and maintaining the charge. Interest is compounded, so a long placement can accumulate a substantial sum.

You will also usually be expected to contribute most of your income towards the fees while the deferral runs, keeping a disposable income allowance. Ask the council for a written illustration showing the projected debt after two, five and ten years before you sign anything.

The alternative most families do not price up

Because the value of the home you live in is disregarded for care at home, staying put and bringing care in avoids the property question entirely. For a couple, this is often decisive: one live-in carer supports both partners, while two care home places would be charged separately.

Live-in care with Reedsfield Care starts at £1,150 a week, and there is no admission process, no waiting list and no minimum contract. For many families the honest comparison is not care home fees against home care fees, but care home fees plus a charge on the house against home care fees and an unencumbered property.

• Your own home is disregarded in the financial assessment for home care
• One live-in carer can support a couple in the same house
• No admission process, waiting list or contract lock in
• Care usually starts within 24 to 48 hours of assessment
• Familiar surroundings often reduce distress in dementia

Renting out the property instead

Some families let the property and use the rent to meet part of the fees, either alongside a deferred payment agreement or instead of one. This keeps the asset, generates income and can significantly slow the growth of any deferred debt.

It brings landlord obligations, void periods and tax to manage, so it suits families with someone able to take that on. Discuss it with a later life financial adviser before committing.

Questions to ask before signing

Ask for the total projected cost over realistic timescales, the current interest rate and how often it changes, all fees, what happens if the property does not sell quickly, and what happens if care needs change.

Also ask the council to confirm in writing whether care at home has been properly considered as an alternative. Discharge teams are under pressure and residential care is sometimes proposed simply because it is quicker to arrange, not because it is the better outcome.