Moving into a care home: deferred payments explained
If you need to move into a residential care home we will look at your financial situation – this is known as a financial assessment. The assessment might show that you need to pay the full cost of your residential care. If the money you have is tied up in your home a Deferred Payment Agreement may help to pay your care home costs without the need to immediately sell your home.
What makes me eligible
- You have savings and capital of less than £23,250 not including the value of your home
- You own your own home
- No-one else lives in your home
- You are/will be in long-term residential care - visit the arranging a needs assessment page to find out more
How it works
If you are eligible we will lend you money to pay for your care home costs. You can delay repaying us until you choose to sell your home, leave residential care or until after your death.
The first 12 weeks
When we carry out your financial assessment we will not take the value of your property into account for the first 12 weeks of your permanent stay in a care home. This is to give you time to decide what you want to do with your property now that you no longer live there.
You might want to look at your options during these 12 weeks including:
- Asking for independent legal and financial advice
- A Deferred Payment Agreement or another type of loan taking into account the value of your home
- Selling your property
- Renting out your property to help you to meet your care costs
After 12 weeks
If you meet the eligibility criteria after the first 12 weeks we will offer you a Deferred Payment Agreement. This is under the following terms:
- Maximum loan – the maximum amount we can lend you is equal to the value of your home minus 10% for selling costs and the nationally set ‘lower capital limit’ which is currently £14,250
- The debts must be repaid
- Once your property has been sold you will have 90 days to repay the money (deferred amount)
- If the debt is not paid after 90 days we will begin a formal debt recovery process to recover the debt, which may include court action
Considerations during your Deferred Payment Agreement
During this time you will need to:
- Pay for the upkeep and maintenance of your home - we will need evidence this has been completed every year
- Keep your home insured and provide us with annual buildings insurance documents
- Pay for utility bills
- Ensure your home is secure
- Let us know who would deal with your estate in the event of your death
Revaluing your home
We may need to re-value your home during your Deferred Payment Agreement. This might happen:
- Once your loan reaches 50 percent of what we can lend you
- If regular maintenance of the property has not been completed you would need to pay for the cost of any further valuation
There are additional costs associated with the Deferred Payment Agreement, namely interest and charges. Details are as follows:
- Interest is charged on the full amount of the loan plus any interested added over time
- Interest rates are set by the Department of Health and are reviewed on 1 January and 1 July each year – they are based on the cost of Government borrowing plus 0.15%
- Initial set up fee for legal and admin - £936.20 (price reviewed 2023)
- Annual review fee on anniversary of Deferred Payment Agreement - £323.80 (price reviewed 2023)
- Charges are made to cover the cost of setting up the legal agreement including land registry fees and costs of valuing your home and to cover administration
Paying additional costs
- You can choose to pay your additional fees and charges in full as they are applied or they can be added to your accruing debt
- Interest will be charged if they are added to the debt
- If you apply and it does not go ahead you or your estate will be invoiced for the cost of any work we have already completed
What money will I have?
We will ensure that you keep a minimum amount of income each week once you enter into a Deferred Payment Agreement, which is known as the Disposable Income Allowance and is set at £144 a week. This amount:
- Also includes the standard weekly Personal Allowance of £24.90 to meet your personal needs while you are in long term care
- Is to make sure you have enough money to maintain your property
You can choose to use some of your £144 per week to pay back some of the money you are being loaned by the Council which would help reduce your level of debt.
How benefits are affected
Most of your income e.g. your pension and some means-tested benefits income will need to go towards paying for your care costs before we can meet the shortfall in what you can afford to pay. To ensure you’re aware of how entering into a Deferred Payments Agreement affects your benefits you should check:
- Whether any existing benefits will be affected i.e. you may not qualify for Income Support or Pension Credit, which will increase the amount of the loan but you may still get Attendance Allowance or the daily living element of Personal Independence Payment
- Whether you are entitled to other benefits - visit our benefits you can get if you have a disability web page to find out more
Renting out your property
You may wish to rent out your property whilst you are in long term care. If you do we will take some of that income into account when we work out how much you should contribute towards the cost of your care during the life of the loan. However we will allow you to keep 50% of the rental costs for your own use.
If you do this you will need to:
- Let us know and keep us updated of any changes
- Have an agreement in place should your property be occupied at the time your loan is due to be repaid
Inability to make decisions
If someone lacks capacity to make decisions and is unable to apply for a Deferred Payment Agreement on their own then someone else can make decisions on their behalf.
Visit the what if someone can't make their own decisions web page to find out more.
Who to contact for more information
Our Financial Assessments Team can explain the scheme in more detail, provide application forms and answer any questions.
You can contact them by: