What is The Deferred Payment Agreement (DPA)
The DPA is designed to help you if you have been assessed as having to pay the full cost of your residential care or extra care placement - but you cannot afford to pay the full weekly charge because most of your capital is tied up in your home.
The DPA offers you a loan from Hull City Council using your home a security. It doesn’t work in exactly the same way as a conventional loan; the council does not give you a fixed sum of money when you join the Agreement, but instead pays an agreed part of your weekly care and support bill for as long as necessary.
How does a DPA work?
You will pay a weekly contribution towards your care that you have been assessed as being able to pay from your income and savings. The council pays the part of your weekly charge that you cannot afford until the money tied up in your home becomes available. The part the council pays is your ‘deferred payment’.
The deferred payment builds up a debt, which is cleared when the money tied up in your home is released. For many people this will be done by selling their home, either immediately or later on. You can also pay the debt back from another source if you want to. However, you do not have to sell your home if you do not want to. You may, for example, decide to keep your home for the rest of your life and repay out of your estate, or you may want to rent it to generate income. If you do this you will be expected to use the rental income to increase the amount you pay each week, thus reducing the weekly payments made by the council and therefore minimizing the eventual deferred payment debt.
In most cases the property is not taken into account for the initial 12 weeks of becoming a permanent resident in the care home. An example where the property does not qualify for this 12 week disregard is when someone has been self-funding in a care home and they then come back to the local authority for part-funding, as their capital has fallen below £23,250.
Who qualifies for a DPA?
To apply for the DPA you must -
- Have capital (excluding the property) of less than £23,250
- Be professionally assessed as requiring and be entering permanent residential / nursing care / extra care in a registered care home or extra care facility
- Own or have part legal ownership of a property which is not benefiting from a property disregard and ensure your property is registered with the land registry); if the property is not, you must arrange for it to be registered at your own expense
- Have the mental capacity to agree to a DPA or have a legally appointed agent willing to agree this.
If your partner lives in your house
If you need care in a care home but your partner lives in your own home then the council will consider your partner’s circumstances as well as your own. Provided your partner lives in your home as their main or only home, and that you are not estranged or divorced, the local authority should exclude the value of your home when it assesses your finances to work out how much you will have to pay towards the costs of your care. This means that you should not face having to sell your home to pay for care and will not need a deferred payment agreement.
If you and another person part-own your property (and it isn’t disregarded) and you would otherwise be eligible for a deferred payment, you should still be entitled to a deferred payment
Whilst in the agreement
You will need to -
- Have a responsible person able to ensure that necessary maintenance is carried out on the property to retain its value
- Insure your property (copy of buildings insurance must be provided)
- Pay your contributions in a timely and regular manner. If you fail to pay your contributions on a regular basis the councils reserves the right to add this debt to the loan amount.
The loan will have interest charged on it in the same way a normal loan would be charged on money borrowed from the bank. The maximum interest rate that will be charged is fixed by the government. Currently the maximum rate is applied and may change 1st January and 1st July every year. This interest will be compounded on a daily basis.
The interest will apply from the day you enter the Deferred Payment Agreement. You will receive annual statements advising of the outstanding debt.
The rate of interest charged will be 2.65% as set by the Economic and Fiscal Outlook Report, and updated twice yearly.
Costs associated with the Deferred Payment Agreement
There is an initial arrangement / set up charge of £1,050, for the provision of the Deferred Payment Agreement. This includes the costs of:
- Administration costs - £275
- Legal costs - £275
- Valuation - £400
- Redemption fee - £100
If the property is unregistered there is an additional legal fee of £250
There is also an annual administration fee of £50 for the cost of maintaining the account and providing 6 monthly statements.
On the 1st and 2nd anniversary of the start date of the deferred payment we will complete an office-based valuation, free of change
On the 3rd anniversary of the start date of the deferred payment we will complete a full valuation, at a cost of £400
You may choose to rent your property which may give you enough income to cover the full cost of your care. There are advantages to this as you will not accrue a debt, be liable to interest and administrative charges and your property will be occupied. Your tenant will be paying the utility and council tax bills which will reduce your outgoings.
You may choose to pay the full cost of your care from your available income and savings / assets, or a family member may choose to pay some or all of this for you.
Please note, if you choose to fully fund your care you need to contact the Care Home to confirm the weekly rate.
Independent Financial Advice
You should take independent financial and legal advice to help you decide which course of action will be financially better for you,
Please note: we can tell you about the options but cannot advise you what might be best for you.
Useful organisations for funding information -
Your agreement with Hull City Council
If you decide to use the deferred payment Agreement you enter into a legal agreement with the council by signing an agreement document. You will be agreeing to place a mortgage on the property.
The council’s legal department will contact you to complete that process. Please respond to all correspondence promptly.
The agreement covers both the responsibilities of the council and your responsibilities.
You can end the agreement at any time (for example if you sell your home) and then the loan becomes payable immediately. Otherwise your loan ends on your death and the loan becomes payable 90 days later.
How to apply for a DPA?
If you already receive council arranged care services speak to your case worker.
If you are already arranging or intend to arrange your own care home contract please contact Hull Financial Assessment Team on 01482 300 300