Deferred Payment Agreements: How to avoid selling your home immediately to pay for care

Deferred Payment Agreements: How to Avoid Selling Your Home Immediately to Pay for Care

For many families, the thought of selling the family home to pay for care is deeply unsettling. Deferred Payment Agreements (DPAs) offer a practical solution, allowing you to delay selling your home while still meeting care home costs. Understanding how DPAs work, who is eligible, and what the long-term implications are can help you make confident, informed decisions—and give your loved ones time to adjust.

What is a Deferred Payment Agreement?

A Deferred Payment Agreement is a formal arrangement with your local authority. It lets you use the value of your home to pay for care home fees, without having to sell it straight away. Instead, the local authority pays the care home on your behalf, and you repay the debt later—usually when your home is sold, either during your lifetime or after you pass away. A legal charge is placed on your property, similar to a mortgage.

Who Can Apply for a DPA?

You may be eligible for a DPA if:

• You are moving into a care home and own your home (with no spouse, partner, or dependent relative living there).

• Your savings and other assets (excluding your home) are below the upper capital limit (£23,250 for 2025–26).

• The property is registered in your name and is not subject to significant legal disputes.

Local authorities must offer a DPA if you meet the criteria, but they can also use discretion in other cases, such as where the property is jointly owned or there are unusual circumstances.

How Does a DPA Work?

• The local authority pays your care home fees (or the part you can’t afford from your income and savings).

• A legal charge is placed on your property, protecting the council’s interest.

• Interest and administration fees are added, but these are usually lower than commercial rates.

• The agreement continues until you sell your home, pass away, or choose to end the arrangement.

You can still rent out your home while on a DPA, and the rental income can help cover care costs, reducing the amount deferred. This can be a helpful way to preserve more of your estate for your loved ones.

Worked Examples

• Mrs. Jones:
  Mrs. Jones moves into a care home costing £4,000 per month. She owns her home, worth £300,000, and has £15,000 in savings. With a DPA, the local authority pays the care home fees, and the debt builds up over time. After three years, the total deferred amount (including interest and fees) is £150,000. When Mrs. Jones passes away, her home is sold, and the local authority is repaid from the proceeds. The remaining value goes to her beneficiaries.
  
  

• Mr. and Mrs. Ahmed:
  Mr. Ahmed needs care, but his wife remains living in their home. The property is disregarded in the means test, so a DPA is not needed. If Mrs. Ahmed later moves out or passes away, and Mr. Ahmed is still in care, a DPA could then be considered to avoid a forced sale.
  
  

• Joint Ownership:
  Sarah and her brother inherit their mother’s home. Sarah needs care and wants a DPA, but her brother still lives in the property. The local authority may not offer a DPA until the brother moves out, as the property is not available for sale.

Pros and Cons of a DPA

Pros:

• No need to sell your home immediately, giving your family time to grieve and plan.

• More time for the housing market to recover if prices are low.

• You can still leave an inheritance if the home’s value exceeds the debt.

• Renting out the property can help reduce the debt.

Cons:

• The debt grows over time due to fees and interest.

• Less inheritance may be left, especially if care is needed for many years.

• The home may eventually need to be sold to repay the debt.

• Not all properties are eligible (e.g., if there are legal disputes or the property is overseas).

Common Questions and Pitfalls

• What if the home is jointly owned?
  All owners must agree to the DPA, and only your share can be used. If a co-owner lives in the property, the DPA may not be available until they move out.
  
  

• Can I pay off the debt early?
  Yes, you can settle the debt at any time, for example, if you or your family decide to sell the home.
  
  

• What if the value of the home drops?
  The local authority cannot ask for more than the property is worth when sold, but this may reduce what’s left for your beneficiaries.
  
  

• What if I move out of the care home?
  The DPA ends, and you’ll need to settle the debt, usually by selling the home or making other arrangements.
  
  

• What about interest and fees?
  Interest is charged on the amount deferred, and there may be set-up and annual administration fees. These are set by the local authority and should be explained clearly before you sign.

Forward Planning Tips

• Talk to your family early about your wishes for your home and care. This helps avoid rushed decisions and family disagreements.

• Keep your will and property ownership details up to date.

• Consider renting out your home to help cover costs while you’re in care.

• Review the terms of the DPA carefully, including interest rates and fees. Ask for a written statement of all costs.

• Keep records of all correspondence and agreements with the local authority.

Emotional Realities

It’s natural to feel anxious about the prospect of selling the family home, especially if it holds sentimental value. A DPA can give you and your family breathing space, allowing you to avoid a rushed house sale and make thoughtful decisions about your future. It’s not a way to avoid paying for care, but it does offer flexibility and peace of mind at a difficult time.

Key Takeaway

A Deferred Payment Agreement can be a lifeline for families who want to avoid a forced sale of the home. It gives you time, options, and a sense of control. The most important thing is to understand the rules, plan ahead, and keep your loved ones involved in the conversation.