What is a deferred payment agreement?

Kelly Collier
12 minutes ago
2 min read

I often have to talk to clients who are navigating care fees about the tough decisions, this includes what happens to your home if you go into care. When someone you love needs care, everything feels like it’s moving too fast. Decisions are coming thick and fast so the last thing you need is pressure to make big, irreversible decisions about the family home.

So… what is a Deferred Payment Agreement?

In plain English: a Deferred Payment Agreement (or DPA) is an arrangement with your local authority that allows you to delay paying for your care until a later date. It means that selling a house immediately can be postponed when a move into a care home happens.

Think of it like a back to front mortgage. Your mortgage company (the local authority) give you money to pay care fees. You pay the mortgage back after you die or if you sell the house. Simple!

Why do people choose a DPA?

A DPA is an alternative to selling your home under pressure. It gives you time to think to explore other funding options. The family home is often loaded with memories and history and often families do not wish to sell. The property market may have dropped significantly due to economic issues which means that the house would lose a considerable amount of money if sold right then. You may be able to rent the property to cover care fees with other income that is received by the person needing care. There are a whole list of reasons why a DPA may be appropriate for your circumstances.

Who can get a DPA?

Not everyone qualifies automatically but if:-

someone moves into a care home permanently
someone owns their own home
someone has savings below £23,250 (excluding the value of the home)
someone doesn’t have a spouse or dependent still living in the home
and the property has enough equity in it

then your local authority must offer you a Deferred Payment Agreement.

How does it actually work?

Once the agreement is in place:

The local authority pays the care home fees
The amount builds up like a loan with interest
The home remains unsold during lifetime, unless you choose to sell it
When the property is sold the council gets repaid from the sale proceeds

Are there any down sides?

Unfortunately there are. DPAs are no longer interest or charge free.

Interest does apply, and there may be admin fees.
The loan can only go up to a certain percentage of the property’s value (usually around 70–80%).
You’ll need to keep the home insured and well maintained while the DPA is in place.
And you’ll need proper legal advice before signing anything as the paperwork is not pleasant!

But, don't let the downsides stop you from considering this as a way to fund care fees. As part of the care advice Argo provides we can walk you through the DPA process so you can fully understand what you are agreeing to before you sign. We are here to help!