Deferred Payment Agreements Explained
A Deferred Payment Agreement (DPA) lets you use the value of your home to pay for care home fees — without having to sell it immediately. The council pays your fees upfront and recoups the money later, secured as a charge against your property. This guide explains how DPAs work, who qualifies, what they cost, and the important pros and cons to consider.
Key facts at a glance — 2026/27
Councils in England, Scotland, and Wales must offer a DPA if you are eligible. You have a legal right to request one.
You do not have to sell your home to enter care. The debt builds up and is repaid when the property is eventually sold.
Interest is charged at the gilt market rate plus 0.15% per year in England. The rate is set every six months.
The council places a legal charge on your property. The total debt — fees plus interest — must not exceed 90% of your home's equity.
In England, you must have savings below £23,250 (excluding your home) to be eligible.
DPAs are only available for permanent care home placements — not short-term or respite stays.
What is a Deferred Payment Agreement?
When someone moves into a care home permanently, the local authority carries out a financial assessment (means test) to decide how much, if anything, it will contribute to the fees. If the person owns a property, its value is normally included in the assessment — which often means they are expected to fund their own care until the house is sold.
A Deferred Payment Agreement is a formal loan arrangement under the Care Act 2014 that removes this pressure. Instead of selling the property immediately, the council pays the care home fees on the resident's behalf. The accumulated debt — fees plus interest — is secured as a legal charge against the property and repaid when the property is eventually sold, either during the person's lifetime or from their estate after death.
Think of it as a council-backed equity release specifically for care costs. It gives families time to make considered decisions about the property rather than being forced into a rushed sale.
How it works — step by step
Needs and financial assessment
The council assesses the person's care needs and carries out a financial means test. If savings (excluding the property) are below £23,250 in England, a DPA may be available.
DPA agreement signed
The council and the resident (or their representative) sign a formal DPA. The council places a legal charge on the property — similar to a mortgage — to secure the debt.
Council pays the care home
The council pays the care home fees directly. The resident contributes their income (pension, benefits) as normal, and the remainder is deferred against the property.
Interest and admin fees accrue
Interest is charged on the outstanding balance at the gilt rate plus 0.15% per year. Some councils also charge a one-off administration fee (typically £100–£500).
Property sold or estate settled
When the property is sold — either while the person is alive or after death — the total debt (deferred fees + interest + admin fees) is repaid to the council from the proceeds.
Who is eligible for a Deferred Payment Agreement?
Eligibility rules are set by the Care Act 2014 and vary slightly between England, Scotland, and Wales. In England, you must meet all three of the following criteria:
You own your home
You must own a property (or have a beneficial interest in one) that is not currently disregarded from the financial assessment. The property must have sufficient equity to secure the debt.
Savings below £23,250
Your savings and capital — excluding your home — must be below the upper capital limit of £23,250 in England (£21,500 in Scotland; £50,000 in Wales). Above this, you are expected to self-fund.
Permanent care placement
The DPA is only available for permanent, long-term care home placements. It cannot be used for short-term, respite, or intermediate care stays.
When is your home automatically excluded from the assessment?
Your home is disregarded (not counted) in the financial assessment — meaning you would not need a DPA — if any of the following people continue to live there:
- Your spouse or civil partner
- A dependent child under 18
- A close relative aged 60 or over, or who is incapacitated
In these cases, the council cannot include your home in the means test at all, and a DPA would not be necessary.
Capital limits by nation — 2026/27
| Nation | Lower limit | Upper limit (DPA threshold) | Interest on DPA |
|---|---|---|---|
| EnglandThis site | £14,250 | £23,250 | Gilt rate + 0.15% |
| Scotland | £10,750 | £21,500 | No interest charged |
| Wales | £24,000 | £50,000 | Gilt rate + 0.15% |
| Northern Ireland | £14,250 | £23,250 | Contact local HSC Trust |
Interest rates and costs
A DPA is not free money — it is a loan that accrues interest. Understanding the costs is essential before committing.
Interest rate (England & Wales)
Interest is charged at the prevailing gilt market rate plus 0.15% per year. The rate is reviewed and set every six months by the Department of Health and Social Care. It is compound interest, meaning it accrues on the growing balance.
Administration fee
Most councils charge a one-off administration fee to set up the DPA, typically between £100 and £500. Some councils also charge an annual management fee. Ask your council for a full schedule of charges before signing.
Equity limit
The total debt (deferred fees + interest + charges) must not exceed 90% of your home's equity (market value minus any mortgage). The council must stop deferring fees if the debt approaches this limit.
Ongoing property costs
You remain responsible for the costs of maintaining the property while it is empty — buildings insurance, council tax (though a 50% discount may apply for empty properties), and any maintenance. These are not covered by the DPA.
Worked example — how the debt builds up
Margaret moves into a care home in England. Her home is worth £220,000 and she has £18,000 in savings. Her care home fees are £1,100 per week. After her income contribution (state pension + Attendance Allowance = £280/wk), the weekly amount deferred is £820. The DPA interest rate is approximately 4.5% per year.
| Year | Fees deferred | Interest accrued | Total debt | Remaining equity |
|---|---|---|---|---|
| Year 1 | £42,640 | £960 | £43,600 | £176,400 |
| Year 2 | £85,280 | £3,780 | £89,060 | £130,940 |
| Year 3 | £127,920 | £8,490 | £136,410 | £83,590 |
| Year 4 | £170,560 | £15,270 | £185,830 | £34,170 |
By year 4, the remaining equity is approaching the 90% limit. The council would need to review the arrangement at this point. These are illustrative figures only — actual amounts depend on the council's rate, the home's fee, and the resident's income.
Pros and cons of a Deferred Payment Agreement
Advantages
- No need to sell your home immediately — gives families time to make considered decisions.
- Your home may increase in value while you are in care, leaving more equity for your estate.
- You can rent out your property to generate income that reduces the amount being deferred.
- You may be able to include top-up fees in the DPA, allowing you to choose a preferred care home.
- The council is legally required to offer a DPA if you are eligible — you cannot be refused.
- Interest rates are capped and regulated — typically lower than commercial equity release products.
Disadvantages
- Interest accrues on the full balance — the longer you are in care, the more the debt grows.
- You remain responsible for property maintenance, insurance, and council tax on the empty home.
- The debt reduces the inheritance you can leave to family members.
- If property values fall, there may not be enough equity to cover the full debt.
- Administration and management fees add to the overall cost.
- The DPA ends if you move back home or the property is sold — it is not a permanent solution.
Alternatives to a Deferred Payment Agreement
A DPA is not always the best option. Consider these alternatives before committing:
Sell the property
If the property is empty and no one needs to live in it, selling it and using the proceeds to self-fund care is often the simplest approach. You avoid interest charges and ongoing maintenance costs, and you have a clear picture of your total assets.
Rent out the property
Renting out the property generates income that can be used to pay care fees directly, reducing or eliminating the need to defer. If you do have a DPA, rental income can be used to reduce the deferred balance and slow the accumulation of interest.
Equity release
Commercial equity release products (lifetime mortgages or home reversion plans) are available from private lenders. These can be more flexible than a DPA but typically carry higher interest rates. Always seek independent financial advice before considering equity release.
Immediate needs annuity
An immediate needs annuity (also called an immediate care plan) is an insurance product that pays a guaranteed income for life to cover care fees. It can provide certainty about costs and protect against the risk of living a long time in care, but requires a large upfront lump sum.
How to apply for a Deferred Payment Agreement
You can request a DPA at any point during the financial assessment process, or after you have already moved into a care home. Here is what to do:
Request a care needs assessment
Contact your local council's adult social care team and request a care needs assessment. This is free and you are entitled to one regardless of your financial situation.
Ask for a financial assessment and DPA
During or after the needs assessment, ask specifically for a financial assessment and state that you want to be considered for a Deferred Payment Agreement. The council must tell you about DPAs if you are eligible.
Get independent financial advice
Before signing any DPA, seek independent financial advice from a SOLLA-accredited later-life adviser or a solicitor who specialises in care funding. They can help you compare the DPA with alternatives and understand the full cost.
Review and sign the agreement
Read the DPA carefully before signing. It must set out the interest rate, administration fees, the equity limit, how the debt will be repaid, and what happens if the property is sold or you move back home.
Keep the property maintained and insured
Once the DPA is in place, ensure the property is adequately insured and maintained. Inform the council of any significant changes to the property's value or condition.
Useful resources
Frequently asked questions
Can I end a Deferred Payment Agreement early?
Yes. You can repay the deferred amount (fees plus interest) at any time and end the DPA. This might happen if you sell the property, receive an inheritance, or decide to use other funds to clear the debt. The council must accept early repayment without penalty.
What happens to the DPA if I die?
The DPA continues until the property is sold or the estate is settled. The executor of your estate is responsible for repaying the total debt (deferred fees plus accrued interest) to the council, usually from the proceeds of the property sale. The council must be repaid within 90 days of death, though extensions can be requested.
Can I include top-up fees in my DPA?
Yes, in some cases. If you want to live in a care home that costs more than the council rate, and a family member cannot pay the top-up, you may be able to include the top-up amount in your DPA — effectively deferring it against your property. Not all councils allow this, so check with your local authority.
What if the council refuses my DPA application?
If you meet the eligibility criteria, the council is legally required to offer you a DPA under the Care Act 2014. If it refuses without good reason, you can challenge the decision through the council's formal complaints process and, if necessary, escalate to the Local Government and Social Care Ombudsman.
Does a DPA affect my benefits?
A DPA should not directly affect your entitlement to benefits such as Attendance Allowance or Pension Credit, as the property value is already excluded from the means test once the DPA is in place. However, any rental income from the property will be taken into account in your financial assessment.
Can I rent out my property while a DPA is in place?
Yes, and it is often a good idea. Rental income can be used to reduce the amount being deferred each week, slowing the accumulation of interest and preserving more of your equity. You must inform the council if you start renting out the property, as the income will affect your financial assessment.
Is a DPA the same as equity release?
They are similar in concept — both use your home's value to fund care — but they are different products. A DPA is a council-administered loan under the Care Act, with regulated interest rates and specific eligibility criteria. Commercial equity release products are offered by private lenders and may have different terms, rates, and flexibility. Always seek independent financial advice to compare the options.
This page provides general information about Deferred Payment Agreements in England. Rules differ in Scotland, Wales, and Northern Ireland. Interest rates and capital limits are correct for 2026/27 but are subject to change. This is not financial or legal advice. Always seek independent advice from a qualified financial adviser or solicitor before entering into a DPA.
Find out if a DPA applies to your situation
Use our free calculator to understand your funding position — whether you qualify for NHS funding, local authority support, or need to self-fund — before exploring a Deferred Payment Agreement.