Deferred payments & financial assessments for long-term care
Following one of our latest articles about financing your care, we’re going to take a closer look at how deferred payments and financial assessments for long term care actually work. Moving into a care home can be stressful for all involved, and if there isn’t a large pool of savings to dip into or the majority of assets are tied up in property, you may find that you’re offered a deferred payment agreement following a financial assessment – but what does this all mean?
What is a deferred payment agreement?
This type of arrangement is set up with your local authority as a means to use the value of your owned home to help pay for your long-term care, if a financial assessment finds that you are unable to pay your care home fees any other way. Instead of a loan with a lump sum, the amount accrues over time against the value of your property.
This means that your care home fees will be paid by the council and you’ll sign a legal document to say that the money will be repaid once your home is eventually sold. As a guarantee, the council will usually put a legal charge on your property via the Land Registry which is then removed once the outstanding balance has been repaid.
Meeting the deferred payment eligibility criteria.
To take advantage of the scheme you’ll need to meet certain criteria:
- Savings or capital less of less than a certain amount (not including the value of your property) – in England this is £23,250
- You need to be a homeowner or have another asset the local authority can use as collateral
- No one else, such as a spouse or any dependents should be living in the house
- You must be in, or planning to be in long-term care for 12 weeks or more
Is there a limit for the lending?
Many local authorities will put a cap of about 70% to 80% of the value of your home, although the exact amount will depend on the area in which you live, there’s a maximum nationwide limit of 90%.
The reason that the limit is put in place, is to ensure that you or the executor of your estate will have enough capital left over to cover any costs associated with the sale. It also allows a buffer to ensure that if house prices were to fall, the local authority would still be able to have the outstanding balance cleared.
Extra charges you may face
As well as the value of your care home fees, you may also face some extra charges. These are usually added to your total outstanding balance to be cleared at the time the property is sold and can include things like:
- Administration fees from your local authority to set up the deferred payment agreement
- A fee to the Land Registry if your property is unregistered
- Valuation costs for the property
- Interest rates differ between different areas in the UK, but if the balance isn’t cleared at the end of the agreement then charges may be applied until it is
- Ongoing administration fees if the money isn’t paid back at the end of the agreement
Repaying your local authority
Once your property is sold, or you decide to leave your care home you’ll be required to pay back the outstanding balance as well as any administration costs or interest. If the circumstances are that you have passed away, then the executor of your will is required to clear the balance either on the day your property is sold, or 90 days after the date of your death, whichever comes first.
Of course, local authorities know that it’s a difficult time, and if you are struggling to repay on time, you may be granted an extension – but do make sure you let them know as soon as you can.
If you decide to rent out the property whilst you are in residential care, then you can use the monthly payments from your tenants to go towards your fees, which means you’ll have a lower deferred debt at the end of the agreement.
When can I apply for a deferred payment agreement?
Unfortunately, stays that are classed as short-term aren’t covered in this scheme, so it’s only after 12 weeks that you’ll be able to apply to your local authority and be considered for the financial assessment and then the deferred payment agreement.
A deferred payment scheme is something that we take part in at both of our quality care homes in Weymouth. Find out more about the long-term residential care and support we can provide by calling Peter on 01305 787811.