How does it work?
You sign a legal agreement with us. We then place a legal charge on your property. You need to pay for this expense. The agreement covers our responsibilities and yours too.
The amount you can defer depends on the value of your home, which determines your ‘equity limit’.
You need to provide 2 independent property valuations.
If we cannot agree on the value of the equity or beneficial interest in your property, we request a professional valuation. We will pass this cost to you.
As a guide, most people can use around 80 to 90% of the equity available in their home.
The limit on equity is to protect you from not having enough money to pay sale costs of the property (like solicitor’s fees) and to protect us against any drop in housing prices and the risk that we may not get all of the money back.
We provide a statement of all fees and charges deferred every 6 months, and review the value of your home annually or as required.
Other forms of security
We must have adequate security in place when entering into a deferred payment agreement. We consider the merits of each case individually.
Other forms of security might include:
- a third party guarantor – this is dependent to the guarantor having / offering an appropriate form of security
- a letter of undertaking from a solicitor
- an agreement to repay the amount deferred from the proceeds of a life assurance policy
We can refuse a deferred payment if adequate security is not in place.
Setting up a Deferred Payment Agreement costs £600 + VAT.
We will charge you for administrative costs associated with deferred payment agreements, including legal and ongoing running costs.
You can choose to add these administration charges to the total amount deferred as they accrue, or pay these separately.
Currently, we add £100 + VAT to your fees at the end of each year or (part year) to cover these costs.
We will charge you for any legal costs incurred in claiming money due.
We will charge interest on any amount deferred to help cover the cost of lending.
The interest rate must not exceed the maximum amount specified in regulations. The national maximum interest rate will change every 6 months - on 1 January and 1 June each year.
The first rate was set on 1 January, 2015.
We add interest on a compound basis, which continues to accrue on the amount deferred even once you have reached the equity limit. It will accrue after you have died, until repaid.
The interest rate is 1.85% APR with effect from 1 July 2016.
You are responsible for home insurance and its maintenance. It is up to you to consider the benefits of keeping your house occupied. You could rent it out and use the income to reduce the amount you asked us to defer.
We will take account expenses to maintain your home when calculating how much you pay towards your care, up to a maximum of £144 per week.
Cancelling the agreement
Normally deferred payment agreements end on your death and the loan becomes payable 90 days later.
However, you can end the agreement earlier if you wish (for example, if you sell your home).
If you do end the agreement, the loan then becomes payable immediately.
We cannot cancel the agreement without your consent.
When does the deferred payment start?
It starts 13 weeks after your permanent admission to residential or nursing care.
In the first 12 weeks, you pay a contribution towards the cost of your care, but we do not include the value of your home in your capital.
When will we stop deferring residential or nursing fees?
We will stop deferring any further fees when you have reached your equity limit or if you qualify for council support in paying for your care in the future.
We will add interest and administration charges until everything is paid.