Deferred Payment Agreements for Care Home Fees: A Full Guide

Topic cluster: Care Home Costs & Funding | Reading time: 7 min

A Deferred Payment Agreement (DPA) is an arrangement where your local council pays your parent's care home fees — and is repaid when the property is sold. It allows your parent to move into care without immediately selling the family home. For many families, it is an important bridge between starting care and selling property.

How a Deferred Payment Agreement Works

Under a DPA:

The council pays your parent's care home fees on their behalf
The debt accumulates over time (plus interest and any admin charges)
The debt is repaid when the property is sold — either during your parent's lifetime or from the estate after their death

It is, in effect, a loan secured against the property. Your parent retains ownership of the property while in care.

Who Is Eligible?

To be eligible for a DPA in England, your parent must:

✅ Have been assessed by the council as needing permanent residential care
✅ Be a homeowner
✅ Have savings excluding the property below £23,250
✅ Have no eligible person living in the property (spouse, partner, certain dependent relatives)

If all these conditions are met, local authorities in England are legally required to offer a DPA. Your parent cannot be refused if eligible.

Scotland, Wales, and Northern Ireland operate similar schemes but with different thresholds and terms — contact your local council for details.

How Much Can Be Deferred?

The total amount that can be deferred is typically capped at 70–80% of the property's value, to ensure there is equity remaining to cover interest, charges, and eventual repayment.

What Does It Cost?

Interest: The council charges interest on the outstanding loan. In England, this is capped at a government-set maximum rate (currently linked to the Office for Budgetary Responsibility's forecast). Interest accrues from the point the DPA is entered into.

Administration fee: The council typically charges a one-off fee to set up the DPA — covering property valuation, Land Registry registration, legal costs, and administration. Example fees range from around £500 to £1,500, though this varies by council.

Property maintenance: Your parent is still responsible for insuring and maintaining the property during the DPA period — even if they are living in care.

The total cost of a DPA is therefore: care fees deferred + interest + admin charges.

In Scotland: No interest is charged unless the agreement is ended or within 56 days of the person's death.

Advantages

No immediate forced sale — your parent can move into care without selling the home
Time to sell properly — a rushed sale often achieves less; a DPA allows the property to be sold at the right time
Income from renting — some families rent the property during the DPA period, with rental income reducing the outstanding debt
Benefits unaffected — Attendance Allowance, PIP, and DLA are not affected by a DPA
Property value growth — if property values rise, the equity grows, potentially offsetting some interest costs

Disadvantages

Interest accumulates — the longer the DPA runs, the more is owed
Reduced inheritance — the outstanding debt is repaid from the estate, reducing what is left for heirs
Property responsibilities continue — insurance, maintenance, and a mortgage (if any) remain your parent's responsibility
Equity release conflict — if your parent already has an equity release scheme on the property, they may not be eligible for a DPA

Income During a DPA

Your parent's income (State Pension, private pension, benefits) is still assessed during a DPA. The council requires income to contribute towards care fees — the DPA only covers the part of the fee that cannot be met from income and remaining savings.

Disposable Income Allowance (England only): If property maintenance costs are significant, these are taken into account when calculating how much income your parent must contribute. Your parent retains at least £144/week as a disposable income allowance.

How to Apply

Arrange a care needs assessment and a financial assessment from your parent's local council
Ask the financial assessor about the Deferred Payment Agreement — it should be offered to eligible individuals automatically
The council will instruct a property valuation and register a legal charge on the property
Once set up, the council pays the care home directly

The process takes up to 12 weeks. If there is any delay, the 12-week property disregard may bridge the gap.

If You Disagree with a DPA Decision

If you believe your parent was unfairly refused a DPA, ask the council for a written explanation. If still unsatisfied, you can escalate through the formal complaints process and ultimately to the Local Government and Social Care Ombudsman.

Compare care homes matched to your funding situation at homeformum.com