10 things you need to know about deferred payments
The different options available to pay for care can be bewildering, and decisions are often made at a time of crisis when emotions are running high. It’s therefore well worth taking the time to get good quality advice on what is available in order to find out what will work best for you.
So what happens in the event that the majority of your wealth is tied up in your home and you are unable to fund care? One of the options may be a deferred payment agreement, and here are the top ten things you need to know when exploring this option.
1. What is a deferred payment agreement?
A deferred payment agreement is an arrangement between an individual and the Local Authority allowing you to use the value of your home to help pay for the cost of your residential care. If you cannot afford to pay the full weekly cost of care, this invaluable agreement saves you from selling your home immediately, whilst offering you the precious benefits of time and choice.
2. How does a deferred payment agreement work?
A deferred payment can be considered as a loan, using your home as security. You will have the opportunity to pay for as much of your weekly contribution that you are able to afford, with all excess additional costs that you might not have the means for, covered.
3. How is a deferred payment paid back?
You can choose to sell your home at any time of your convenience in order to repay the loan, or alternatively you may wish to keep your home and have the payment repaid out of your estate following your passing. The debt may also be paid back in any other chosen way.
4. Who can have a deferred payment agreement?
You will be eligible to apply for a deferred payment agreement if you are:
- Assessed by a social care worker as needing residential care
- Currently living or going to live permanently in residential care
- Own, or partly own, a home
- Have funds of less than £23,250
5. What is a disposable income allowance?
The disposable income allowance affords you the right to keep a proportion of your income. This allowance aids you in continuing to pay for ongoing house insurance, any associated property maintenance costs as well as helping to cover your weekly spending needs.
6. What will I need to do in order to enter into a deferred payment agreement?
- Ensure your home is registered with the Land Registry
- If a person or company has an interest in your home, you must acquire their written permission to have a deferred payment agreement
- You must be certain that there is an individual responsible for the necessary ongoing maintenance needed on your home
- Have appropriate insurance in place covering your home
7. What are the charges on deferred payment agreements?
The fees associated with the deferred payment agreement are to cover costs as opposed to yield profit. A compound Interest rate will also be charged.
8. What are the key advantages of deferred payment agreements?
Local Authorities appreciate that a home is a lifetime of memories. You will not be under any pressure to sell your home during your life if you do not wish to. The deferred payment agreement offers the benefit of choice.
9. How do I end my deferred payment agreement?
You, or any chosen individual acting on your behalf, may pay the loan off and end the agreement at any given time.
10. If I do not want a deferred payment, what are my other options?
One size does not fit all, and if you believe that a deferred payment is not for you, there will always be other options:
- You might prefer to rent out your home and use this income to cover the cost of your care
- You may choose to arrange equity-release
- You can purchase a care fee annuity
- You may prefer to pay the cost of your care from your existing savings or assets
For further information or advice on deferred payments, please get in touch with our team.