A deferred payment agreement is the arrangement of a loan from BCP Council where property, usually your home, is used as security.
For more details please refer to BCP Council's Deferred Payment Agreement Policy (opens in a new window).
It is recommended that you seek independent financial advice before applying for a deferred payment to make sure it is right for you. You may also like to contact Citizens Advice on the Dorset Adviceline (03444 111 444) or Help & Care (0300 111 3303).
What is a deferred payment agreement?
An assessment of your finances, income and savings will determine how much you will pay as a weekly contribution towards your care. The council pays the weekly charge that you cannot afford until the value from your property is realised. The part the council pays is your deferred payment.
A deferred payment agreement is the arrangement of a loan from BCP Council where property, usually your home, is used as security. It is not the same as a conventional loan where you would be given a fixed amount of money. Instead the deferred payments builds up as a debt. The agreement ends when you no longer require assistance in meeting your residential care costs; you then must repay the debt. You can do this either using proceeds from the sale of your property, from other funds you may have access to, or - if you have passed away - your executor must repay from your estate.
The amount you can defer will depend on the cost of the care you will receive, the amount of money you will contribute towards your care home costs and the value of your property. This determines your 'equity limit'.
Please note: your equity limit may change if the value of your property changes.
The council will charge interest on any amount deferred, including any deferred administration charges, and on interest that has already been accrued (this is called compound interest). The interest rate is based on the maximum interest rate set nationally (this is reviewed every six months by the Office for Budget Responsibility). Interest will accrue on the amount deferred until the deferred payment is repaid in full to the council.
Who is eligible for a deferred payment?
You may be offered a deferred payment if:
- you have been assessed by an adult social care worker as needing residential or nursing care and are already receiving care in a care home or moving to one soon;
- your property is registered with the Land Registry (if not, you must arrange for this at your own expense);
- you have savings and/or investments of less than the current capital threshold of £23,250 (not including the value of your home or your pension fund);
- you are the sole owner of your property (if it is held in joint names, the other owners must agree to the charge being put on the property);
- you pay your contribution regularly and on time (any outstanding contributions may be added to the deferred payment debt); and
- you have mental capacity to agree to a deferred payment agreement or have a legally appointed person willing to do this (for more information on applying for deputyship, please see www.gov.uk/become-deputy).
There should be no other beneficial interests, such as outstanding mortgages or equity release schemes, in the property. If there are, the council will make checks to see if you can still be offered a deferred payment agreement.
Your agreement with BCP Council
To make use of a deferred payment, you must enter into an agreement with BCP Council which covers your and the council's responsibilities. Once the agreement has been signed the council will place a charge on your property to safeguard the loan.
You will need to pay for placing the charge on your property and for a land search, as well as legal costs and registry charges. There is also an annual administration fee which covers the costs relating to a valuation of your property. You can ask for a breakdown of all these costs.
These costs can be paid separately or added to the loan.
For details of the requirements you must adhere to, please see Appendix A of the Deferred Payment Agreement Policy (opens in a new window).
For details about the end of your deferred payment agreement (including reasons why the council might cease deferring costs), please see sections 2.16 and 2.17 of the Deferred Payment Agreement Policy (opens in a new window).
Please note: a deferred payment agreement is a legal arrangement. Any debt arising from the agreement must be paid and the council is entitled to pursue court proceedings where all other avenues to settle the debt fail.
The deferred payment and your client contribution
We will assess your income and capital and you will still need to pay a contribution to your care. You can choose to keep up to a specified amount per week of your income but the amount you choose to keep will affect how much you will defer. The more you contribute from your income towards the cost of your care, the smaller the debt that you build up as part of the deferred payment agreement. You should seek independent financial advice when making this decision, and make sure you have enough money to cover necessary expenses (including to maintain the property).
Renting out your property
It is possible to rent out your property to increase the amount you pay each week towards your care and reduce the eventual deferred payment debt. If you choose to do this, it is your responsibility to maintain and insure the property. The rental income, less an agreed amount to cover expenses to maintain your property, will be considered when the council assesses how much you will contribute to the cost of your care. You should inform Her Majesty's Revenue and Customs (HMRC) of your rental income.
For more information
If you would like to find out more about deferred payments please telephone the Financial Assessment and Benefits Team or Stour Valley and Poole Partnership: