Deferred payment agreements

A deferred payment is when the council pays your care home fees, until you are ready to sell your home and use the money raised to pay back the council.

This lets you delay selling your home until you choose to, or until after your death.

It is designed to help you if the council has assessed that you can afford to pay the full cost of your care home fees, but most of your assets are tied up in your home.

The council uses national rules to work out how much you will have to pay towards the cost of your care home fees.

A deferred payment is a loan from the council using your home as security. The council does not give you a fixed sum of money, but pays an agreed part of your care home fees.

You will still need to use most of your income to pay the care home fees. The council will pay the part of the fees that you cannot afford, until you sell your home.

The deferred payment builds up as a debt – when you sell your home, you will have to pay back the debt to the council. You can also pay the debt back from another source if you want to.

The Care Act 2014

This law introduced a national deferred payment scheme. This may help people who own a property and who don’t have enough other assets (savings and investments) to pay for residential care they have been assessed as needing.

There are other ways of paying for your care. You could rent your home and use the income to pay towards your care fees. This will reduce how much the council pays. You not need a deferred payment or it may be smaller.

You might decide to pay back the council from your estate, after your death.

You should get independent financial advice to help you decide on the best option.

Applying for a deferred payment agreement

Deferred payment agreements are for homeowners who do not have many other assets and who have been assessed by social workers as needing residential or nursing care. 

If you can tick yes to the following you can apply for a deferred payment:

  • I have assets (excluding the value of my property) of less than £23,250
  • I own my home
  • My spouse, partner or another relative who is over 60 or who is unwell does not live in my home
  • My home is registered at the Land Registry (If your property is not registered you must arrange for it to be registered at your own expense)
  • I have the mental capacity to agree to a deferred payment or I have a Deputy or a Lasting Power of Attorney (a person who is legally appointed to manage your financial affairs)
  • I have no other beneficial interests in my property (for example an outstanding mortgage or equity release scheme) unless this is approved by the council
  • A social worker has assessed me as needing residential care.

The deferred payment agreement

A deferred payment agreement is a legal agreement with the council. We will place a charge on your property to safeguard the loan.

You can end the agreement at any time, for example if you sell your home, the loan becomes payable immediately.

The agreement ends on your death and your estate will need to repay the loan as soon as possible.

We will send you a statement every six months, so you can see how much the loan is for and how much equity is left in your property.

Once we have lent you the value of the equity in your home (the value of your home less 10%, less £14,250 (the lower capital limit set by the government)) we will no longer loan you money. Instead we will pay the fees.You will still need to use most of your income to pay the care home fees. We will pay the rest of the fees. Usually, you will not have to pay this back.

The value of your home may go up or down. We will look at the value of your home at the time it is sold. If the value is less than the amount we have lent you, we will ask you to pay less. However, if the value has gone up, we may ask you to pay us back the loan and an additional amount based on the contributions we have made to your fees.

We cannot cancel the agreement without your consent.

If the NHS agrees that you need continuing health care, they will pay the full cost of your care from then on. We will still charge you interest on the loan, until it is paid off.

Your responsibilities with a deferred payment agreement

Part of the deferred payment agreement is that you must maintain your home, so that it does not lose value. You must also make sure your home is insured. You will have to pay for any maintenance work and insurance, but we can lend you up to £144 per week for this. We will add this money to your loan.

You must pay your contribution to the cost of your residential care in a timely and regular manner. If you do not do so, we may add the money you owe us to your loan.

If someone is acting on your behalf, such as a Power of Attorney, we will talk to them as well, as they have a responsibility for your finances. 

Costs associated with deferred payments

Interest

The loan will have interest charged on it in the same way a normal loan would be charged on money borrowed from a bank. The government fixes the maximum interest rate that will be charged and it will be reviewed on the 1 January and the 1 July each year. The council currently charges 2.65% per year. The interest will be compounded on an annual basis. We will write to you if the interest rate changes.

Administration charge

There is an administration charge for setting up a deferred payment agreement. There may also be an annual administration charge.

Some advantages of the deferred payments scheme

You will not be forced to sell your property in your lifetime to pay for your care.

If we agree there is enough equity in your property, you can include a top up payment in your loan to pay for a more expensive home.

You can rent out your property and use some or all of the rent to pay towards your care costs. This could give you enough income to cover the full cost of your care or reduce the amount of your loan. Also your tenant would be paying the utility and Council Tax bills for your property.

Other options

There are various equity release products and insurance policies available that may suit your personal circumstances.

You may choose to pay the full or part cost of your care from your available income and savings, or a family member may choose to pay some or all of the accommodation charges for you.

You should take independent financial and legal advice to help you decide which course of action will be financially better for you. 

Disclaimer

Salford City Council has supplied details of some organisations that provide independent financial information and advice for your information only and in good faith. The information is not exhaustive and there are other financial advisers available who can provide you with independent financial advice and information. The council has not vetted any of the financial advisers or organisations referred to in this information and their inclusion in the information does not imply any form of endorsement, recommendation, recognition or guarantee of the said organisation or financial advisers or any service they may provide. The council will not be liable for any damages or losses, howsoever caused or suffered by any person in connection with any information and/or advice provided by any external organisation, financial adviser or provider of services.

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