A deferred payment agreement (DPA) lets you use your home's value to pay for care home fees without selling immediately. The council pays your fees and places a legal charge on the property. The current interest rate is 4.75% APR, with a one-off setup fee of £450, as set out in the Care and Support (Deferred Payment) Regulations 2014.
This guide covers England only. Scotland, Wales, and Northern Ireland have different care funding systems.
Last updated: March 2026.
Most families first hear about DPAs in a moment of panic — the care home has been chosen, the financial assessment has happened, and someone mentions that the house will need to be included. The good news is that selling immediately is almost never required. A DPA exists specifically to prevent that.
But a DPA is not free money. It is a secured loan against your property, and the interest adds up. This guide explains exactly how it works, what it costs (with real numbers), and when it does — and doesn't — make financial sense.
How a DPA Actually Works (Plain English)
The mechanics are straightforward, even if the paperwork is not.
Step 1: The council pays your care fees on your behalf. Each week, the council sends payment directly to the care home. You continue to contribute any income you have (pension, benefits), and the council covers the gap between your income and the full weekly fee.
Step 2: A debt accumulates against your property. The amount the council pays on your behalf is recorded as a running total. Interest is added to this balance daily. The debt grows every week you remain in care.
Step 3: A legal charge is placed on your property. This is registered at the Land Registry, similar to a mortgage. It means the property cannot be sold without the council's debt being repaid first. The charge protects the council's interest, but it does not transfer ownership.
Step 4: The debt is repaid. This happens in one of three ways: the property is sold (by you or your family), the debt is paid from the estate after death, or the debt is repaid from other funds at any time. You are never locked in — you can repay early without penalty.
Think of it as a reverse mortgage with one specific purpose: keeping the house while care fees are paid.
Who Can Get One (Eligibility)
Councils in England are legally required to offer a DPA to anyone who meets the criteria. You do not need to ask nicely or negotiate — it is your right under the Care Act 2014.
The main eligibility conditions are:
- Your savings and investments (excluding your home) are below £23,250. If you have more than £23,250 in non-property assets, you are expected to pay from those first. The DPA only becomes relevant once liquid assets are below this threshold. For full details on how the means test works, see our guide on the care home means test.
- Your home has sufficient equity. The property must have enough value to cover at least 12 months of the deferred amount, after accounting for any existing mortgage or charges. The council will commission a valuation.
- You have mental capacity to agree (or a deputy/attorney). If the person entering care lacks capacity, a Lasting Power of Attorney for property and financial affairs — or a court-appointed deputy — can agree to the DPA on their behalf.
- The 12-week property disregard has usually ended. For the first 12 weeks after a permanent care home admission, the property is automatically excluded from the financial assessment. Most councils will set up the DPA to begin after this period. For more on property disregards, see our guide on whether you have to sell your parent's house.
- Joint owners must consent. If the property is jointly owned, the other owner must agree to the legal charge being placed on the property. This can be a sticking point for families — it requires an honest conversation.
If you meet these conditions, the council must offer a DPA. If they refuse or delay unreasonably, you have the right to complain through the council's complaints procedure and, if necessary, to the Local Government Ombudsman.
How Much Does a Deferred Payment Agreement Cost?
This is where most guides stop being useful. They mention "interest" and move on. Here are the actual figures.
The Fixed Costs
| Cost | Amount | When paid |
|---|---|---|
| Setup fee | £450 | One-off, at the start |
| Interest rate | 4.75% APR | Compounded daily on the outstanding balance |
| Valuation fee | Varies (£200-£400 typical) | One-off, at the start |
The setup fee and valuation cost are usually added to the deferred amount, so you do not need to pay them upfront.
Worked Example: 3-Year Care Home Stay
Let's use realistic numbers for a family in England in 2026.
Assumptions:
- Weekly care home fee: £1,000
- Weekly income contribution (pension + benefits): £300
- Amount deferred each week: £700
- Property value: £350,000
- Interest rate: 4.75% APR, compounded daily
Year-by-year breakdown:
| Deferred in year | Cumulative deferred | Interest accrued | Total debt | |
|---|---|---|---|---|
| Year 1 | £36,400 | £36,400 | ~£900 | ~£37,300 |
| Year 2 | £36,400 | £72,800 | ~£2,700 (cumulative) | ~£75,500 |
| Year 3 | £36,400 | £109,200 | ~£8,100 (cumulative) | ~£117,300 |
After three years, the total debt — including interest — is approximately £117,300.
What remains of the property:
- Property value: £350,000
- Total DPA debt: £117,300
- Remaining equity: approximately £232,700
That £8,100 in interest is the price of keeping the house for three years. Whether that is a reasonable cost depends entirely on your family's circumstances. For some, preserving the family home while a spouse remains alive or while the property market improves is well worth it. For others, the interest is money that could have stayed in the estate.
What Happens Over Longer Stays
The interest compounds. Over five years, the numbers shift significantly:
| Duration | Total deferred | Approximate interest | Total debt | Equity remaining (£350K home) |
|---|---|---|---|---|
| 2 years | £72,800 | ~£2,700 | ~£75,500 | ~£274,500 |
| 3 years | £109,200 | ~£8,100 | ~£117,300 | ~£232,700 |
| 5 years | £182,000 | ~£24,500 | ~£206,500 | ~£143,500 |
| 7 years | £254,800 | ~£50,000 | ~£304,800 | ~£45,200 |
At seven years, interest alone accounts for approximately £50,000 — and the equity cushion is dangerously thin. This is why understanding the numbers matters before you sign.
DPA vs Selling Your Home: Comparison
This is the decision most families agonise over. Here is a direct comparison.
| Factor | Deferred Payment Agreement | Selling the property |
|---|---|---|
| Home preserved? | Yes, until debt is repaid | No — sold immediately or soon after admission |
| Interest cost | 4.75% APR, compounding daily | None |
| Flexibility | Can repay early; can switch to selling later | Once sold, the decision is final |
| Timeline pressure | None — the council pays while you decide | Selling can take months; market conditions matter |
| Equity risk | Interest erodes equity over time | Full sale proceeds available (minus agent fees) |
| Emotional factor | Family home retained | Loss of the family home |
| Best suited for | Shorter stays, uncertain prognosis, spouse in property nearby | Longer stays, high-value property, no emotional attachment |
A DPA is not an either/or forever. Many families start with a DPA to buy time and later decide to sell when circumstances become clearer. The DPA gives you breathing room — at a cost.
Worked Scenario: DPA vs Selling Immediately
To make this concrete, let's look at the financial difference between taking out a DPA and selling the house on day one.
The Situation:
- Mary's care home costs £1,200 per week.
- Her income (pension) is £200 per week, leaving a £1,000/week shortfall.
- Her house is worth £300,000.
- She stays in the care home for exactly 3 years.
Scenario A: Selling Immediately
- The family sells the house in Month 1 for £300,000.
- Mary has £300,000 in the bank. She pays the £1,000/week shortfall in cash.
- After 3 years (156 weeks), she has paid £156,000 in care fees.
- Remaining Estate Value: £144,000.
Scenario B: Using a DPA (4.75% Interest)
- The family keeps the house. The council defers the £1,000/week shortfall.
- After 3 years, the deferred care fees equal £156,000.
- The compounding interest (4.75%) on that debt adds approximately £11,600.
- Total debt to the council: £167,600.
- The family sells the house after 3 years for £300,000 (assuming 0% house price growth for simplicity) to clear the debt.
- Remaining Estate Value: £132,400.
The Verdict: In this static scenario, the DPA cost the estate an extra £11,600 in interest. However, if the local property market had grown by just 4% over those three years (adding £12,000 to the house's value), the DPA would have paid for itself. The DPA is essentially a bet on the property market and life expectancy.
Two Types of DPA
Not all councils administer DPAs in the same way. There are two models.
Charging-style DPA (most common)
The council pays the care home directly and records the debt against your property. You do not handle any money. This is the standard arrangement offered by the majority of councils in England.
Loan-style DPA
The council lends you the money, and you pay the care home yourself. This is less common but gives you more control over which home you choose and how fees are paid. Some councils offer this to self-funders who want to top up above the council's usual rate.
In practice, the financial outcome is the same. The interest rate and legal charge apply in both cases. The difference is administrative: who writes the cheque to the care home.
Ask your council which type they offer. If you have a preference, raise it early in the process.
When Should You Avoid a Deferred Payment Agreement?
A DPA is a useful tool, but it is not always the right one. There are situations where it costs you more than the alternatives.
Low property value relative to likely care duration. If the property is worth £180,000 and care fees are £1,000 per week, a DPA will consume most of the equity within four years — leaving very little for the estate. In these cases, selling earlier and investing the proceeds (even in a simple savings account) may preserve more value.
Interest consuming too much equity. At 4.75% APR on a growing balance, the interest accelerates over time. For stays likely to exceed five years — particularly for younger residents or those with slowly progressive conditions — the compounding effect can be severe. Run the numbers before committing.
You might qualify for NHS Continuing Healthcare (CHC). If the primary reason for being in a care home is a health condition (rather than social care needs), the NHS may fund the full cost of care — regardless of assets. This is free care with no means test. It is worth exploring before agreeing to a DPA. Our guide on care home funding eligibility explains who qualifies and how to apply.
The property is in poor condition or difficult to sell. A DPA assumes the property will eventually be sold to repay the debt. If the property needs significant work, has legal complications (such as a boundary dispute or restrictive covenant), or is in an area with low demand, the council may be reluctant to offer a DPA — or you may find it difficult to clear the debt when the time comes.
You want to rent the property out. You can rent the property while a DPA is in place, and the rental income can reduce the amount deferred. However, rental income will be counted in your financial assessment, potentially increasing your weekly contribution. The net benefit may be smaller than expected. Discuss this with the council before arranging a tenancy.
A Critical Step Before a DPA: Never take out a loan against a property without knowing the true cost of the care. If you are entering a DPA to cover a £1,200/week shortfall, are you absolutely sure that home is worth £1,200/week? RightCareHome analyses the Market Sustainability and Improvement Fund (MSIF) data—the exact rates local councils pay care homes. This data routinely shows that councils pay 30-40% less than self-funders for the identical room. Knowing the fair local rate helps you negotiate the base fee down before you defer the balance against the house.
Get Your Custom Funding Action Plan
How to Apply for a Deferred Payment Agreement
The process is not complicated, but it does take time. Allow up to 12 weeks from first contact to the agreement being signed.
Step 1: Contact your local council
Get in touch with the adult social care team. You can do this before or during the 12-week property disregard period. Tell them you want to discuss a deferred payment agreement. They are legally required to provide information about DPAs as part of the financial assessment process.
Step 2: Financial assessment
The council will carry out (or update) a financial assessment. This confirms your capital is below £23,250 (excluding the property), establishes your income contribution, and determines how much will be deferred each week.
Step 3: Property valuation and legal charge
The council will arrange a valuation of the property. You may be asked to use a specific surveyor or given a choice. Once the valuation is agreed, the council's legal team will prepare the charge document and register it at the Land Registry. This is the most time-consuming step — it can take 6-12 weeks depending on the council.
Step 4: Agreement signed and payments begin
You (or your representative) sign the DPA. The agreement will set out the interest rate, the maximum amount that can be deferred (usually up to 90% of the property value, minus any existing mortgage), and the terms of repayment. Once signed, the council begins paying the care home directly.
Important: during the time between admission and the DPA being finalised, the 12-week property disregard covers you. If the DPA takes longer than 12 weeks to set up (which does happen), speak to the council immediately — they should not leave you without funding while the paperwork is being processed.
Key Points to Remember
- A DPA is a legal right under the Care Act 2014, not a favour from the council
- The interest rate of 4.75% APR compounds daily — the longer the stay, the higher the cost
- You can repay at any time without penalty
- The property can be rented out while a DPA is in place (but rental income affects your assessment)
- Joint owners must consent to the legal charge
- Always get the numbers in writing before you sign — ask the council for a projection showing the debt after 1, 3, and 5 years
If your family is navigating care home funding for the first time, understanding the full picture — means test thresholds, benefits, CHC eligibility, and property options — can save tens of thousands of pounds. Our guide on the new rules for care home payments in 2026 explains the current system in full, and our care home funding eligibility guide helps you identify every option available to your family.
For other ways to lower the overall cost of care, see our guide on how to reduce care home fees legally. And if you are worried about savings running out while in care, our guide on what happens when care home money runs out explains the council safety net.
Worked Example: £300,000 Property, £1,100/Week Fees, 4.69% Interest
Assuming a weekly income contribution of £300 and £800 per week deferred:
| After | Total deferred | Approximate interest | Total charge on property |
|---|---|---|---|
| 1 year | £41,600 | ~£1,000 | ~£42,600 |
| 2 years | £83,200 | ~£3,900 | ~£87,100 |
| 3 years | £124,800 | ~£8,800 | ~£133,600 |
After three years, roughly £133,600 is owed against a £300,000 property — leaving approximately £166,400 in equity. The interest alone accounts for nearly £8,800.
Get Your Free Custom Funding Action Plan
Sources
- Care Act 2014 — Full text
- Care and Support (Deferred Payment) Regulations 2014
- GOV.UK — Care and Support Statutory Guidance: Deferred Payment Agreements
- Age UK — Deferred Payment Agreements