The Deferred Payment Agreement (DPA), Explained in Plain English

By Len Burgess, Senior Care Advisor · Published 19 May 2026

The Deferred Payment Agreement: what it is, what it costs, and whether it is the right move for your family.

This is part of our Jargon Buster series, which covers the rule that lets you use your home to pay for care without having to sell it. The Deferred Payment Agreement: what it is, what it costs, and whether it is the right move for your family.


If you have read our post on the 12-week property disregard, you will know that the disregard gives you a short, protected window where the council ignores the value of your home. The Deferred Payment Agreement is what most families should consider next, because it is the main answer to the question that follows: "What happens when the 12 weeks are up?"


A DPA is one of those rare bits of the care funding system that is genuinely on your side. It exists specifically to stop people from being forced to sell their homes in a panic to pay for care.


It is not magic, and it is not free. It is a loan with costs attached. But for the right family, it can be the difference between selling under pressure and keeping the home in the family until the moment that suits you.


Here is exactly how it works.


What is a Deferred Payment Agreement?

A Deferred Payment Agreement is a legal arrangement with your local council under which the council pays your care home fees on your behalf, and you pay them back later out of the value of your home, typically when the property is eventually sold or after your death.


In effect, the council acts as a lender. They cover your care fees while you are alive and in care, the debt builds up against your home, and when the property is sold (or your estate is settled), the council is repaid out of the proceeds. You keep ownership of the home throughout. You do not have to sell it under pressure.


A few essentials before we go further:



How does a Deferred Payment Agreement work?

The mechanics matter because the difference between a good DPA decision and a bad one is almost always in the details.


It starts with a needs assessment and a financial assessment. Before you can apply, the council needs to confirm that you genuinely need care in a care home (the needs assessment) and that your finances meet the eligibility criteria (the means test). A DPA runs through your local council, not as a standalone product.


You apply through the council. If you meet the criteria, your financial assessment officer will explain the scheme and send you an application. Get independent advice before signing, from a solicitor, a regulated financial adviser, or an organisation like Age UK.


The council values your property. They commission a professional valuation, which you can supplement with your own if you want. The valuation determines how much you can borrow, typically up to around 70 to 80% of the value, with a buffer kept back for interest, selling costs, and any drop in property prices.


A legal charge is registered against your home. This is the council's security, registered at the Land Registry, similar to a mortgage. It does not stop you from owning the home, but any future sale has to clear the council's debt first. If you jointly own the home, the other owners have to agree in writing.


The council starts paying for your care home. Under the most common arrangement, the "traditional" or "charging-style" DPA, the council pays your care home directly. A less common "loan-style" DPA has the council pay you, and you pay the home.


You still contribute from your income. A DPA does not mean the council pays everything. You contribute from your income (pensions, certain benefits) while keeping a Disposable Income Allowance of up to £144 a week for personal expenses, property maintenance, insurance, and so on. The DPA covers the gap between your income contribution and the full fee.


Interest and fees accrue against the loan. The government sets a maximum interest rate, reviewed every January and July. For the first half of 2026, the maximum is 4.75% per year, charged as daily compound interest. Setup fees are typically £400 to £750, and some councils charge a small annual admin fee. You can pay the interest and fees as they arise or roll them into the loan.


Setting up the agreement takes around 12 weeks. Which is why the 12-week property disregard exists: it is designed to give you a protected window while the DPA is being put in place.


The loan is repaid when the property is sold, or after your death. You can sell at any time during your lifetime and use the proceeds to clear the loan, keeping whatever is left. If you do not sell, the executor of your estate has 90 days after your death to repay what is owed, usually from the sale of the property.


You can use our DPA calculation, which provides detailed information about if you are eligible.


What are your chances of getting a DPA?

Because a DPA is a mandatory offer when you meet the criteria, the question is really about eligibility, not approval. The council cannot refuse you if you qualify. You need to meet all of the following:



There is one extra factor worth knowing, called the sustainability test. Some councils will look at whether there is enough equity in your home to cover the likely length and cost of your care. If your fees are very high and your property value is modest, they may push back and suggest a more affordable care setting.


The realistic risk for most homeowners going into permanent care is not being refused. It is not being told that a DPA exists, or being talked out of it informally. If you meet the criteria above, you have a legal right to it.


Who tends to use a DPA?

The typical DPA user is straightforward: an older homeowner moving into permanent care, with modest savings outside the property, and a family who would rather not be forced to sell the home immediately.


DPAs are most useful for a few specific situations:



A DPA is less useful where there is no clear plan for repayment, where the home is worth substantially less than the likely lifetime care cost, or where the family would rather sell quickly and use the cash to fund care directly.


The right answer depends on your situation, which is why independent advice before signing matters.


How does this apply to me?

The five questions below come from what families actually ask once they understand the basics.


1. How does a deferred payment scheme actually work in practice?

In day-to-day terms: once your DPA is set up, the council pays your care home each week or month on your behalf. You contribute from your income towards those costs, keeping up to £144 a week as a Disposable Income Allowance. The council adds the gap (the bit they cover) to your loan balance, and interest is charged daily on the outstanding amount.


Every six months, the council sends you a statement showing the total fees paid, the interest accrued, and the current balance against your home. You can pay the interest off as it builds up if you prefer, or let it roll into the loan.


The agreement stays in place until you sell the property, repay the debt from another source, or pass away, at which point the loan is settled out of the property's value, and whatever is left belongs to you or your estate.


2. Are deferred payments a good idea?

For the right family, yes. The honest answer is that it depends on what alternatives you have.


The biggest advantage is that you are not forced to sell during a stressful, emotionally loaded period. You buy time, optionality, and a degree of control. For many families, that breathing space is worth a great deal.


The biggest disadvantage is that the debt grows over time. Interest is compounded daily, you still owe property maintenance and insurance costs, and the longer the loan runs, the more equity it eats. If the goal is to maximise the inheritance left to your family, a DPA may end up costing more than selling early.


A useful way to think about it: a DPA is not a way to avoid paying for care. It is a way to defer paying so the family can choose when and how to release the money. If buying that flexibility is worth the interest and fees, a DPA makes sense.


3. What are the actual disadvantages of a DPA?

Worth being specific about, because this is where families get caught out.


Interest and fees. The 2026 maximum rate is 4.75% per year, compounded daily, plus setup fees of £400 to £750 and possible annual admin charges. The debt grows for as long as the loan runs.


Ongoing property costs. You still own the home, so you still pay for insurance, maintenance, utilities, and any council tax that applies. These come out of your Disposable Income Allowance, which is not generous.


Knock-on effects on benefits. If you have a DPA and decide not to sell, you may lose eligibility for some means-tested benefits like Pension Credit, because the property is still treated as a notional asset for some calculations.


Property risk. House prices can fall. If the value drops, the equity left after repayment shrinks. The council protects itself with the 70 to 80% lending limit, but the family bears the residual risk.


Inheritance impact. The longer the loan runs, the smaller the residual estate. If preserving inheritance is a high priority, model this carefully before signing.


None of these is a reason to avoid a DPA automatically. There are reasons to go in with eyes open.


4. Do all local authorities have to offer a deferred payment scheme?

Yes, in England, Scotland and Wales. Under the Care Act 2014 (and equivalent Scottish and Welsh legislation), every local authority must offer a DPA to anyone who meets the eligibility criteria.


They cannot opt out, cap the budget, or refuse on the grounds of cost to the council. Northern Ireland is the exception: there is no formal national scheme, but local Health and Social Care Trusts may offer something similar.


That said, councils do have some discretion in how they administer their scheme: the exact level of setup fees, whether they charge an annual admin fee, how strictly they apply the sustainability test, and so on. So while the existence of a DPA is guaranteed, the small print varies. Ask for a clear written breakdown of fees before you commit.


5. Can the council put a charge on my home?

Yes, and they have to. The legal charge is how the council secures the loan. Without it, they have no way of guaranteeing repayment, and the scheme would not function.


In practical terms, the charge is registered with the Land Registry as a first legal charge against the property. It does not change your ownership; you remain the legal owner, but any future sale has to clear the council's claim before the rest of the money goes to you or your estate.


If the home is jointly owned, the other owners have to consent in writing to the charge being registered. Once the loan is fully repaid (through a sale, your estate settling the debt, or you repaying from another source), the council removes the charge and the home becomes unencumbered again.


The takeaway

A Deferred Payment Agreement is one of the most genuinely useful tools in the care funding system, and one of the most underused. It will not make you carefree, and it is not a way to avoid paying. What it does is buy you time and choice. It stops a permanent move into care from immediately triggering a forced property sale, and it gives the family the ability to decide when and how the home is eventually released.


The right answer depends on the numbers and your priorities, especially how much you weigh the flexibility against the interest and inheritance cost. Get independent advice before signing, ask for a clear written breakdown of fees, and make sure you understand the full picture.


Our funding calculator can show you how a DPA fits into the overall cost of care, alongside other routes like NHS Continuing Healthcare, NHS Funded Nursing Care, and the 12 week property disregard.


This article is for general guidance only and reflects the rules on Deferred Payment Agreements in England as of 2026, where the upper capital limit is £23,250, and the maximum interest rate is 4.75% for the first half of the year. Wales and Scotland have similar schemes with their own thresholds; Northern Ireland has no formal national scheme. Fees and interest are reviewed twice a year. For advice tailored to your circumstances, contact your local council's adult social care team, Age UK, MoneyHelper, or a regulated financial adviser who specialises in care funding.

Sources

Frequently asked questions

Can I get a Deferred Payment Agreement if I want care in my own home instead of a care home?

No. DPAs are specifically for funding permanent care in a registered care home. They are not available for homecare, day care, or any other care delivered in your own home. The logic is that the home is being used as security for the loan, and the scheme is designed for situations where the person is no longer living in the property. If you need care at home, the relevant routes are local authority means tested support, NHS Continuing Healthcare if your needs are primarily health related, and benefits like Attendance Allowance or PIP. A DPA is not the right tool for that situation.

What happens to my Deferred Payment Agreement if I run out of equity in my home?

There is a built in limit. The council will only let you borrow up to around 70 to 80% of the property's value, keeping a buffer for selling costs, interest, and possible price falls. They review this regularly, and when 70% of the value has been used, they typically pause the agreement and review the situation. At that point you have a few options: you can sell the property and use the proceeds to clear the loan, you can repay from another source, or you can apply for council means tested support, since your remaining capital will likely be below the £23,250 threshold. The point is, you will not suddenly find yourself with care fees you cannot pay. The system is designed to flag the issue before that happens.

Can I get a Deferred Payment Agreement if I have a mortgage on my home?

Possibly, but it depends. The council needs to register a first legal charge on the property as security, which means their claim sits ahead of anyone else's. If you have an existing mortgage that is small relative to the home's value, the lender may agree to step aside (subordinate their charge), allowing the council to take first position. If the mortgage is large or the lender will not agree, the DPA cannot proceed in the usual way. Each case is judged on the specific numbers, so do not assume an existing mortgage rules you out. Tell the council about it early in the conversation and they will work through whether the maths makes sense.

Does my family or anyone else have to sign the DPA agreement?

You sign the agreement yourself if you have the mental capacity to do so. If you do not, someone with a valid Lasting Power of Attorney for property and finances, or a Court of Protection deputyship, can sign on your behalf. Family members without that legal authority cannot sign a DPA for a relative, which is one of several reasons it is worth thinking about a Power of Attorney long before care becomes urgent. The other situation where someone else signs is when the property is jointly owned: any co-owner has to consent in writing to the legal charge being registered against the property, even though the loan is yours.

Can I end a Deferred Payment Agreement early if I change my mind?

Yes. You can terminate a DPA at any time, but doing so triggers full repayment of the loan straight away, including all accrued interest and administration fees. In practice, the most common reasons for ending a DPA early are selling the property (the sale proceeds clear the loan), coming into money from another source like an inheritance, or moving out of care entirely. If you simply change your mind and want to keep the home while paying care fees from elsewhere, you can do that, but the council will need the full balance settled. Speak to your council's DPA team for an exact redemption figure, which they should provide within 28 days.