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Using your home to pay for a care home

You won’t have to sell your home in your lifetime to pay the cost of a care home.

We can pay the care home bills for you until:

  • you choose to sell your home
  • your estate sells your home after your death

This is known as a ‘deferred payment agreement’.

Qualifying for a deferred payment agreement

Your home must be registered with the land registry.

You must ‘have the mental capacity’ to understand the agreement and how it works. Someone may lack mental capacity because, for example, they have:

  • dementia
  • had a serious brain injury or illness

If you don't have the mental capacity to understand the agreement, someone else must have the legal power to make decisions on your behalf

You may want to give someone else the legal power to manage your affairs in case you are unable to in the future.

Applying for a deferred payment agreement for someone else

If you’re applying for a deferred payment for a relative, you must have the legal power to manage their affairs.

Signing the agreement

You or the person who has the legal power to manage your affairs has to sign the deferred payment agreement. If you own your home jointly with another person, they must also sign the agreement.

We will invoice you for the amount you are paying towards the cost of the care home until the agreement is finalised.

Fees and interest

The council will charge fees in relation to a DPA.

  • £241 application fee
  • £150 to value your home
  • £210 to set up the deferred payment agreement
  • £203 to finalise the deferred payment agreement
  • £95 once a year to cover the cost of managing the agreement
  • £150 to revalue your home - every other year and when you've used half (50%), and 70%, of your equity in the property or if the value of your home changes

The fees are usually subject to change on 1 April each year.

Once an application for a DPA has been made the resident or their personal representative will be liable to pay all the fees and costs incurred. This includes when the application cannot, or is not completed because;

  • the application is withdrawn,
  • the resident passes away, or
  • the required terms and conditions are not met.

Interest is charged on the amount owed. The Government sets the maximum interest rate. The rate can change every six months on 1 January and 1 July. 

The rate for 1 July 2018 to 31 December 2018 is 1.85% per annum.

The rate for 1 January 2019 to 30 June 2019 will be 1.65% per annum.

You can find past rates in our deferred payment scheme information sheet.

 

Deferred payment scheme information sheet   Opens new window

You can pay the fees and interest when they are due or add them to your deferred payment agreement.

Statements

We will send you statements every 6 months telling you:

  • interest and fees you've been charged up to the date of the statement
  • total amount you owe
  • equity left in the property
  • when you're likely to use up the equity left in the property at the current rate you're paying

You can ask for a statement at any time. We will send it to you within 28 days.

How we work it out

The maximum amount that can be deferred is the value of your home, minus 10%, minus the lower savings and assets limit (£14,250).

Example
Mrs Smith owns a house worth £200,000. The maximum amount that she can defer would be:
£200,000, minus £20,000 (10%), minus £14,250 = £165,750.

Valuing your home

The council’s Property Services department will value your home.

They will value it again when you've used half of the amount deferred. This is to make sure that the value of your home still covers the likely cost of your care.

Combining a deferred payment with other ways to pay

You can combine a deferred payment with money from:

  • your income – including a pension
  • savings or other assets
  • someone else or a charity
  • a financial product you’ve bought to pay for long-term care

You have the right to keep up to £144 a week of your income (known as the ‘disposable income allowance’). You can choose to keep less than that and put more towards the cost of your care.

Upkeep of your home

You must make sure that all necessary repairs and maintenance are done to your home – using your disposable income allowance.

Insuring your home

You must insure your home with the correct insurance.

You must be able to show us:

  • a copy of the insurance policy
  • a receipt or other evidence of the last renewal of the policy
  • how much and how long the property is insured for

You must not knowingly do anything that will make the insurance policy invalid, eg not telling your insurer that you have builders in if your policy says you must tell the insurer

Renting out your home

You can rent out your home. You’ll need to:

  • have a shorthold tenancy agreement with the tenant
  • give us a copy of the agreement
  • have landlord insurance

You’ll be able to keep half the rental income. You’ll have to put the rest towards the cost of the care home. 

Selling your home

You can choose to sell your home during your lifetime or the executor of your estate can sell it after your death. When the home is sold, you or your executor must repay the full amount due on the deferred payment agreement.

Time limits

The amount owed on the deferred payment agreement will be due 90 days after your death. We will charge interest on the amount owed until it’s repaid.

Securing the deferred payment

We will take out a ‘legal charge’ against the property to make sure the amount you owe on the deferred payment agreement is paid back. A legal charge is a document held by the Land Registry that shows we have a claim on the property.

We will remove the legal charge when you or your executor pay back the amount owed on the deferred payment agreement – including fees and interest.

You can't take any other loans against the value of your home without our written permission.

 

Get independent financial advice about deferred payment agreements.

 

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