What is a deferred payment agreement for care homes?

A deferred payment agreement (DPA) is a council scheme that allows people to delay paying care home fees until they sell their home — preventing the need to sell urgently while someone is in crisis. It is a loan, not a grant.

Who can apply for a deferred payment agreement?

To be eligible, you must meet all three criteria:

• You are in a care home and need to contribute to fees from your capital
• You have a property that is not occupied by a spouse, dependent, or qualifying relative (which would exempt it from the financial assessment)
• Your savings (excluding the property) are below £23,250

How does it work?

The council agrees to pay care home fees on your behalf, and a legal charge is placed on your property (similar to a second mortgage). The debt — including interest (currently around 5–6% per year, set nationally) and an admin fee — accumulates and is repaid when the property is eventually sold. You can sell at any time, and the debt must be repaid within 90 days of the property sale.

How long can it last?

A DPA lasts until you choose to repay it, sell the property, or die. There is no fixed time limit — it can continue for many years if needed. After death, the estate has 90 days to settle the debt before additional interest may apply.

What are the costs involved?

• Interest charged at the nationally set rate (current rate available from your local council)
• An admin/setup fee (typically £250–£500)
• You may also need to maintain insurance, set-up costs upkeep costs on the property

Risks and things to consider

• Interest accumulates: Over many years in care, the total debt can become substantial. A home worth £250k with fees of £900/week plus 5.5% interest over 5 years may result in a significant shortfall for the estate.
• Property must be maintained: If the property is empty, it still needs to be insured and maintained. Councils may place conditions around this.
• It is a loan, not free money: The estate will owe the council this money — heirs receive less.
• Not available in all situations: If anyone is still living in the property, it will usually be excluded from the financial assessment entirely — making a DPA unnecessary.

Alternatives to a deferred payment agreement

• Renting out the property: Rental income can help fund care while preserving the property for eventual sale
• Equity release: A specialist financial product — seek independent advice before considering this
• Selling immediately: If the property is vacant and unlikely to be needed again, prompt sale removes ongoing maintenance costs and interest
• Care Fees Annuity: A one-off insurance product that funds care for life — seek specialist advice

This article provides general information only. For advice specific to your situation, speak to a specialist care fees financial adviser or solicitor.