Deferred payment agreements

About deferred payment agreements

A deferred payment agreement is a type of loan that homeowners can use to pay for their care home or nursing home.

It’s designed for people who cannot afford their weekly care costs because most of their money is tied up in the value of their home and they don’t want to sell their home straight away.

How it works

It's not like a conventional loan where you get a fixed sum of money.

Instead, we will pay an agreed amount of your care costs every week, on the condition that you will repay us later when you sell your home.

This could be when you choose to sell it in your lifetime or after you have died. You can also repay us from another source if you want to.

We charge interest on the loan and we will secure it against the value of your property.

Before securing any loans against your home, it’s important to think carefully and get financial advice.

Fees and interest you will pay

We will charge fees for setting up the loan and also a small amount of interest on the amount you owe. The fees will be set to cover the council’s costs and not to make a profit.

Fees and interest rates

Fees are reviewed twice yearly. Here you will find the fees for the financial year 2024/2025.        

The loan interest rate is 4.25% (effective from 1 January 2025).

The maximum interest rate on the loan is fixed by the Government and based on the cost of Government borrowing. The Government reviews the interest rate twice a year on 1 January and 1 July.           

Fees

Fee type	Charge
Admin set up charge	£165
Admin annual charge	£82
Admin termination charge	£131
Legal charges	Set by solicitor, usually around £450.00
Land registry charge	Between £40 and £910 depending upon house value
Land search	Between £20 and £125 depending upon house value
Independent property valuation (if required)	Varies, set by estate agent

Paying off fees and interest

When you apply, you can choose to pay off the interest and fees on your account every six months. If you choose to do this, an invoice will be attached to the statements you get twice a year. If you do not pay the invoice in full within 28 days, it will be added back to the amount you owe on your account. You can write to us at any time to stop or start paying off your interest and fees.

Eligibility

To qualify, you must:

• have had a needs assessment that shows you need to be in a care home or nursing home permanently
• have no more than £23,250 in savings and investments
• own part or all of a property that was your main or only home
• have written permission from any joint owners of your home (only your share of the property can be used as equity for the loan)
• make sure your home is registered with the Land Registry
• be able to make your own finance decisions, or have a legally appointed financial representative who can make decisions for you
• have enough equity in your home to cover at least 12 months of care costs
  
• have a responsible person willing and able to keep the property in good condition so that it does not lose value
• be able to insure your property at your own expense

If your partner is in a care home too

If you jointly own your property, and both you and your partner are permanently in a care home, you will each need to apply for your own deferred payment agreements. Your agreement will be based on just your share of your home. There must be enough value in your home to cover both of your costs.             

Mortgages, loans or equity release already on your home

It is unlikely you will be allowed to have a deferred payment agreement if you have other outstanding loans, mortgages or equity release schemes on your home.               

Renting out your home

You can rent out your property while having a deferred payment agreement. You will be expected to use any rental income to pay towards your care home fees, but this will mean you can borrow less money from us in your deferred payment agreement.             

Keeping track of your loan

You will get a statement twice a year, on 30 June and 31 December. This will show how your loan is being worked out including your fees and interest and how much you owe.

We will keep track of the loan and alert you if you are reaching the limit of the amount of money tied up in your home. If you want us to reassess the amount of money in your home, you will need to give us a new official valuation of your property.

Ending the agreement

You can end the loan agreement at any time, for example if you sell your home. But you must then pay back the full loan straight away.

You can sell your home to anyone you like, even a family member, but it must be for the true market value.

You can also pay us back with money from somewhere else if you like, so that you do not have to sell your home.

You are the only person who can cancel the agreement. Nobody else can do it for you unless they are your acting as your deputy or have power of attorney for money and property.

If you do not choose to end the agreement, it will end when you die and the loan will need to be repaid within 90 days.

How to apply

If you’re interested, you can get an application form from the person who does your financial assessment or by calling us on 0113 378 8559.

You will have to sign a legally binding agreement.

What you'll need to apply

When you apply you will need:             

• a completed application form (contact us to request one)
• photo identification of your or your legal representative, such as a passport or driving licence, which has been certified by a professional
• original property deeds if your property is not registered with the Land Registry
• an up to date property valuation of your home
• proof of legal status of your financial representative
• death certificates of any deceased people still named on the title deed of the property

Basic terms of the agreement

We will secure the loan against the equity value in your property. The regulations state that a first legal mortgage charge must be accepted on your property as adequate security.

As a condition of your agreement we will register a legal charge against your property at HM Land Registry. When the loan is eventually repaid we will remove the charge. If you jointly own your home, any other owners must agree in writing to a legal charge being registered against the property to secure your loan.

Your financial assessment will work out how much you pay each week towards your care home fees. We will pay what’s left of these weekly fees to make up the difference. The fees we pay each week will be added to the amount you’re borrowing (your loan). This amount is what we call the deferred payment.