Deferred Payment Agreements Explained

A Deferred Payment Agreement (DPA) is a legal arrangement with your local council that lets you delay paying care home fees by using the value of your home as security. Instead of selling immediately, the council covers the shortfall in your fees. The debt builds quietly over time and is repaid later, usually when the property is eventually sold or from your estate after death.

For many families, a DPA answers one of the most painful questions in care planning: what happens to Mum’s home?

What Is a Deferred Payment Agreement?

Think of it as a council-backed loan secured against your property. You move into a care home, the local authority covers the portion of your fees that your income and savings can’t meet, and a legal charge is placed on your home through the Land Registry. The debt grows in the background. You don’t have to sell.

DPAs exist to protect people whose capital is tied up in property rather than accessible savings. They’re not a grant. Every penny must be repaid in full, with interest and administration fees added.

Two types of DPA

• Traditional (charging style): The council contracts directly with the care home and pays on your behalf. This is the most common route.
• Loan style: The council lends you the money and you pay the care home yourself. You have more control, but also more personal responsibility.

Who Is Eligible for a DPA?

The council is legally required to offer you a DPA if you meet all four of the following conditions. We’ve written these in plain English rather than statute language, but the rules themselves come from the Care Act 2014.

1. Your care needs have been assessed and a care home placement is agreed as the right way to meet them.
2. You have a legal or beneficial interest in a property that is your main or only home.
3. Your capital (savings and investments, not counting your home) is below £23,250.
4. Your home is not already being disregarded in the financial assessment, for example because a spouse or qualifying relative still lives there.

You’ll also need to be willing to accept the agreement’s terms and provide a first legal charge on the property as security.

One thing many people don’t realise: even self-funders can apply. If you’re paying your own fees but meet the criteria, the council must offer you a DPA.

If your spouse, civil partner or a qualifying relative is still living in the property, your home is usually excluded from the financial assessment altogether. In that case you wouldn’t need a DPA, because the property wouldn’t count as capital in the first place.

The council has some discretion to offer a DPA even where the strict criteria aren’t fully met. If you’re refused, you have the right to challenge the decision through the council’s formal complaints procedure.

If the person moving into care doesn’t have mental capacity to sign the agreement, someone with the legal authority to act on their behalf will need to do so. That means either a Lasting Power of Attorney for financial decisions or a Court of Protection deputy.

The 12-Week Window: Why Timing Matters

When someone first moves into a care home as a permanent resident, their home isn’t immediately counted as capital. There’s a protected period called the 12-week property disregard, during which the council can’t include the property’s value in the financial assessment. We cover this in detail in a separate article.

The DPA is designed to be set up within this window, so there’s no funding gap when the disregard ends. Start the conversation with your local council as early as possible, ideally before or right after a permanent placement is agreed.

How the Equity Limit Works

You can’t defer an unlimited amount. The total you can defer is capped at an equity limit, calculated as follows:

Equity limit = Property value minus 10% minus £14,250 minus any existing mortgage or secured loan

The 10% buffer protects against a fall in house prices. The £14,250 deduction mirrors the lower capital threshold used in social care means testing.

Example: Margaret’s home is valued at £350,000 with no mortgage. Her equity limit = £350,000 minus £35,000 (10%) minus £14,250 = £300,750. Once the deferred amount approaches that figure, the council must give at least 30 days’ written notice. At that point she’d need to sell the property, find another funding source, or apply for council funding if eligible.

The council will revisit the DPA when 70% of the property’s value has been used, to talk through options and make sure the arrangement is still sustainable.

Interest, Fees and Costs

Interest is charged on the amount deferred. As of January 2026, the national maximum rate is 4.75%, compounded daily. This rate is reviewed every six months by the Department of Health and Social Care, on 1 January and 1 July each year. It’s linked to government borrowing costs (the OBR gilt rate plus 0.15%). Your council can’t charge more than this national maximum.

Compound interest accumulates on both the original deferred amount and on the interest already built up. Over a long period, this can become substantial. Ask your council for a worked illustration of how the debt would grow over time.

You can choose to pay the interest separately on an ongoing basis rather than letting it roll up. This keeps the overall debt lower and is worth considering if your income allows it.

Administration fees cover legal costs, Land Registry fees, property valuations and setup work. Fees vary by council. In Surrey, for example, total arrangement fees from April 2026 are £1,844, with an annual administration charge of £148. You can usually defer these fees too, though interest then accrues on them from the start date. Every council must publish its full fee schedule.

Your Disposable Income Allowance

You don’t hand over all your income under a DPA. In England, you’re entitled to keep a Disposable Income Allowance (DIA) of up to £144 per week. This is there to help cover ongoing property costs such as insurance, energy bills and maintenance while you’re living in a care home.

You can choose to keep less than the full allowance if you want to contribute more towards fees and reduce the amount being deferred. The council can’t pressure you to waive any of it.

Any income above the DIA, such as pension or rental income, can be required by the council as a contribution towards your weekly care costs.

Renting Out Your Home During a DPA

Renting out your property while a DPA is in place is worth considering. Rental income reduces the amount you defer each week, which cuts the overall debt and the interest that builds on it.

A few practical points: you need the council’s consent to rent, you take on landlord responsibilities, and there may be periods without tenants. After 36 months of non-owner-occupation, the property may also become liable for Capital Gains Tax on sale. Independent financial and tax advice is essential before going down this route.

If rental income is high enough to cover your full weekly care costs, you might not need a DPA at all.

What Happens to the Debt?

The deferred amount, including accumulated interest and fees, must be repaid in full when one of the following happens:

• You choose to sell the property and repay from the proceeds.
• You or a third party repay from another source at any time during your lifetime.
• You die, and the debt is repaid from your estate within 90 days.

If you do pass away, the executor of your will or administrator of your estate is responsible for settling the amount with the council. Interest continues to accrue after death until the full debt is cleared. If the estate doesn’t take active steps within 90 days, the council has the right to pursue legal action.

Your family doesn’t have to sell the property if they can find funds elsewhere. The council must accept any form of payment that covers the full amount. Once it’s cleared, the legal charge is removed from the Land Registry.

An Honest Note: The Premium Care Gap

Local councils fund care within their assessed personal budget, and many care homes accept residents at that rate. But if you choose a care home that charges more than the council’s personal budget allows, the difference is called a top-up and would be added to the deferred amount. It should be noted however  that a top-up isn’t always required as some local authorities will fully fund premium care home fees.

A DPA can include top-ups within the deferred amount, subject to the council’s agreement and the equity available. The council must consider any reasonable request and should agree if the equity supports it.

One scenario worth planning for honestly: if the care home you choose charges significantly above the council’s personal budget rate, and you eventually reach the equity limit, you may face having to move to a less expensive home.

If you’re considering a premium provider, independent financial advice from a SOLLA-accredited adviser is strongly recommended before entering a DPA. They can model the long-term costs and compare all available options.

Is a DPA Right for You?

There’s no single right answer. A DPA can give genuine peace of mind during a very difficult transition, particularly if selling isn’t practical right away. But it’s a long-term financial commitment with costs that grow over time.

A DPA may suit you if:

• You need to move into care quickly and the property can’t be sold promptly.
• You want to preserve the option of returning home, or simply don’t want to sell during your lifetime.
• You want to give your family time to plan without financial pressure.
• You want to keep care fee options open while the property market is assessed.

A DPA may not be the best option if:

• Your property could be sold quickly and the proceeds would comfortably cover all care costs.
• Rental income from the property could cover fees without needing to defer.
• An equity release product or other financial arrangement might be more cost-effective.
• The fees at your preferred care home significantly exceed the council’s personal budget, making the equity limit a realistic long-term risk.

Independent financial advice isn’t optional here. It’s the foundation of a sound decision. A regulated, SOLLA-accredited adviser can compare a DPA against equity release, immediate care annuities and other approaches.

How to Apply

Contact the Adult Social Care team at your local council. The relevant authorities for Boutique Care Homes communities are:

• Kent County Council
• Surrey County Council
• West Sussex County Council
• Suffolk County Council

Tell your social worker you’d like to apply. If the property is jointly owned, all owners must agree and sign. The council is required to have the agreement in place within 12 weeks of permanent admission. Rules, timescales and fee schedules do vary between local authorities, so it’s always worth contacting your council directly to confirm their specific process.

We’d recommend seeking independent legal advice before signing the final agreement. You have the right to receive a copy in advance and take reasonable time to review any terms.

At The Care Labs, we’ve put together this guide as a starting point. Our colleagues at Boutique Care Homes are happy to help families understand what questions to ask at each stage of the care journey.

Frequently Asked Questions

What’s the difference between a deferred payment agreement and selling your home to pay for care?

When you sell your home, funds are available immediately and fees are paid from the proceeds. A DPA lets you keep the property while the council covers fees in the meantime, with the debt repaid later. Selling avoids interest accumulating over time; deferring avoids an immediate forced sale during an already difficult period.

Can my husband or wife still live in our home if I enter a DPA?

If your spouse or civil partner is living in the property, your home is usually excluded from the financial assessment entirely under a mandatory disregard. In that case you wouldn’t typically need a DPA at all, because the property wouldn’t count as capital while they remain living there.

Does a DPA affect my Attendance Allowance or other benefits?

A DPA doesn’t affect Attendance Allowance or the care component of DLA or PIP. These aren’t means-tested in the same way. Claiming all benefits you’re entitled to is always a good idea, as it reduces the amount you need to defer each week.

What happens if the property value falls while the DPA is in place?

The equity limit can be recalculated if the property is revalued. If the value falls significantly, the amount you can defer may reduce. The council must revalue the security once the deferred amount exceeds 50% of the property’s value, and periodically after that, adjusting the equity limit accordingly.

Can a top-up for a more expensive care home be included in a DPA?

Yes, in principle. A DPA can include top-ups within the deferred amount if the council agrees and there’s sufficient equity. The council must consider any reasonable request. It’s important to model how long the equity will last if top-ups increase the weekly deferred amount significantly.

What if the council refuses my DPA application?

The council must explain the refusal in writing and tell you about your right to complain. Common reasons include inability to place a first legal charge, insufficient equity, or no suitable legal representative for someone without mental capacity. You can formally challenge the decision through the council’s complaints procedure.

Can we rent out the property while a DPA is in place?

Yes, but you need the council’s consent. Any rental income must be declared and will be factored into your weekly contribution. If rent covers your full weekly fees, you may not need a DPA at all. Get tax advice too, as Capital Gains Tax rules may apply after 36 months of non-owner-occupation.

What happens to the DPA debt after the person dies?

The outstanding amount, including all accrued interest and fees, becomes due within 90 days of death. The executor or administrator of the estate is responsible for repayment, usually through the property sale. Interest continues to accrue until the debt is cleared. The council must wait at least two weeks after death before formally requesting repayment.

Sources

Age UK Factsheet 38: Property and paying for residential care (August 2025)

MoneyHelper: Deferred payment agreements for long-term care

Care Act 2014 and Care and Support Statutory Guidance, Chapter 9

Care and Support (Deferred Payments) Regulations 2014

Kent County Council: Deferred payments for care and support

Surrey County Council: Deferred payments for adult care and support

West Sussex County Council: Deferred payment scheme

Suffolk County Council: Deferred payment agreements

Local Government Association: Interest rates for universal deferred payments

NHS Digital: Deferred Payment Agreements data collection materials

This article is produced by The Care Labs, the free knowledge platform from Boutique Care Homes. It’s intended for general guidance only and doesn’t constitute financial or legal advice. For advice specific to your situation, please consult a regulated financial adviser. Information correct as of April 2026.