You may be eligible for financial assistance from the local government in the form of a long-term loan known as a “delayed payment agreement.”
Agreement for deferred payment: postpone the sale of your home in order to pay for medical expenses
If you are unable to pay for the costs of a care facility and do not wish to sell your home (or if you are having trouble selling your property), a deferred payment agreement may be a viable alternative for you.
If you own your own home and have good credit, you may be eligible for a long-term loan called a deferred payment agreement from your local authority.
Your home will serve as security for the loan, and its purpose will be to finance the expense of your stay in a nursing home.
Your residential care costs will be covered by the local government as part of an arrangement known as deferred payment, and your home will serve as collateral for the loan. You have the option of delaying the loan’s repayment until the time that you sell your house or until after your passing, whichever comes first.
Who can take use of an agreement for postponed payments?
Your local authority must have determined that you require moving into residential care in order for you to be eligible to apply for a deferred payment agreement, or you must already be residing in a care facility in order to qualify for such an agreement.
When you submit your application, the local authority will conduct an analysis of your current and previous financial situations.
If you satisfy all of the following conditions, the council should allow you to postpone your payments:
You have less than £23,250 in savings or other capital (excluding the value of your property) in England, £18,000 in savings or other capital in Scotland, and £50,000 in other capital in Wales.
You are the sole occupant of the house you own, and there is no other person present, such as a spouse or partner, a kid, or a relative who is sixty years old or older.
Local authorities are not required to provide a deferred payment option; but, if they choose not to, they are required to provide a written explanation of their decision. For instance, if they believe the value of your property is insufficient to cover the costs of your care facility bills.
There is no formalised framework for deferred payment agreements under the jurisdiction of Northern Ireland. Despite this, it might not hurt to inquire with your community’s Health and Social Care Trust about the possibility that they could help organise this kind of arrangement.
The advantages and disadvantages of entering into a deferred payment agreement
A deferred payment agreement may be able to assist you in paying for care if all of your available funds are invested in real estate and you do not wish to sell your house. However, this is a significant choice that needs to be given serious consideration before being made.
The benefits of making an agreement for deferred payments
You don’t have to sell your house until you’re ready to, and you won’t have to pay for your own care right away. Until you’re ready to, you don’t have to sell your house.
You will only accrue debt relative to the worth of your home while you are residing in a nursing home or other type of care facility.
In the event that the value of your house goes up during this period, you will have an increased amount of money available to put toward the repayment of the council.
You might be able to rent out your property and put the money you make toward paying off your bills.
It may be feasible to incorporate a top-up fee in the agreement, to cover the expense of a more expensive room
If you are eligible for some benefits, such as Attendance Allowance, you may still be able to submit a claim for those benefits.
For more information, read our advice on what to expect while applying for benefits while residing in a nursing home.
Disadvantages of a deferred payment arrangement
You are still responsible for paying the fees associated with maintaining your house.
You will still be required to have homeowner’s insurance, despite the fact that obtaining it may be difficult because there will be no one living there.
If you currently have a mortgage, you are obligated to maintain making payments on it.
If the value of your property goes down, you may find that you have less money available to cover the costs of your care.
If you don’t sell your house, the money needed to pay for your care will have to come out of your estate after you pass away.
When can I request a deferred payment agreement?
You or a loved one can contact the local authorities and ask for a deferred payment agreement as soon as it has been determined that you or they require moving into residential care. This assessment can take place at any time.
If you are eligible for a deferred payment, the council will probably disregard the value of your property for the first twelve weeks of your stay in a care facility if it is likely that you would qualify for the deferred payment. Because of this, there should be enough time to set up the agreement.
If you or a loved one already resides in a care facility but you were previously unaware of the deferred payment option, you can still contact the council and urge them to consider putting one into place. This applies even if you were previously unaware of the existence of the option.
How much does it cost to enter into an agreement for deferred payment?
Interest charges
The local authorities have the legal right to impose interest on the deferred payment; however, the maximum interest rate that they are permitted to charge is determined by the central government.
In England, this is determined by adding 0.15 percentage points onto the rates found on the gilt market; the rate is updated every six months. Scotland and Wales both use methods that are quite comparable to one another in order to compute interest.
The maximum rate for England was determined to be 0.95 percent, and it will be revisited in the months of July and January beginning on the first of January 2022.
Other applicable charges and fees
Setup fees and administrative costs are two more types of fees that may be assessed by local authorities. However, this should only be enough to pay the fees associated with making the loan. They are prohibited from making a profit of any kind as a result of the arrangement.
If fees are assessed, which is highly possible given the nature of the situation, those fees might include one-time charges as well as annual administrative fees.
The application cost, expenses associated with the valuation or revaluation of your home, and fees associated with the agreement’s set-up and finalisation are all examples of one-time charges that are typical. According to the findings of our investigation, the fees that local authorities demand for instalment payment plans are extremely variable. In England, the total charges may fall anywhere between 450 and 1,150 British pounds.
The continuous costs associated with operating the agreement are covered by the annual payments. According to the findings of our study, there is a significant gap in the management fees collected by local governments; these fees might range anywhere from 25 to 250 pounds each year. While some authorities incorporate the maintenance price into the initial set-up cost, others don’t impose any annual costs all.
Check the website of your local council for information on any applicable fees. Before entering into a deferred payment agreement, you should be sure to check with the local authorities to see if the terms have been published first.
You will have the choice of making a separate payment for the fees or including them in the total sum that you are postponing payment on. Any fees that you postpone will result in interest charges, as was previously explained.
When the property is finally put up for sale
Although they won’t be held personally responsible for the debt, the executor of the estate will be responsible for repaying it out of the estate’s funds even though they aren’t.
What will happen to my income if I choose to participate in a deferred payment plan?
The local authority will conduct a financial analysis before deciding whether or not to approve an agreement for postponed payments.
To begin, they will evaluate your savings and assets, with the exception of the value of your home. In order for you to qualify, your savings and assets must be less than the relevant criteria for your country (for example, £23,250 in England).
The next thing that will be taken into consideration is any source of income that you have, such as the state pension, any other state benefits, or private pensions.
In most cases, unless you have a very low income, you will be expected to contribute a portion of your earnings toward the cost of living in a care facility.
On the other hand, you should be able to keep a certain percentage of the money you earn. This is referred to as a “disposable income allowance,” and the amount that it is at the moment is £144 per week. If you have income in excess of this level, it is quite likely that it will be put toward paying for some of the costs associated with your care.
Any income contribution that you do make in accordance with the agreement will reduce the total amount that you are required to defer, which will result in a lower sum that needs to be paid back when the property is sold.
Contesting a decision made by the local authorities
If you believe that a postponed payment was refused to you unjustly, you should seek clarification from the local government about the reasons for this, and if required, submit a formal protest about the situation.
