Deferred Payment Schemes – Advantages and Disadvantages.

Advantages

It can prevent you having to pay for care costs immediately as costs are borne by the Local Authority and are only recovered on death or earlier sale of the property.
You only build up a debt against your home for the period you need care (or until sell the property if earlier) which can be cheaper than other options should death occur quite soon after starting care.
The value of the property may continue to increase during any deferred period helping to offset the amount charged.
No interest is added unless the debt remains unpaid 56 days after the date of death or earlier sale of the property.
Attendance Allowance can still be claimed during such deferment.
The property can still be rented out although the income produced will just reduce or eliminate any amount the Local Authority would otherwise pay, and would require you to abide by all the regulations a landlord needs to.

Disadvantages

You will still need to pay for upkeep on the property.
It must remain insured. This in itself may be a problem as most home insurances will not cover an undefined period of non-occupancy.
Any property left unoccupied can quickly fall victim of vandalism and damp and therefore you may need to continue to pay for heating and lighting.
Should you still have a mortgage on the property this will still need to be paid per month.
Should an existing equity release scheme be in existence you may not be granted a deferred payment scheme. In fact under the terms of most equity release schemes you would be forced to sell the property or repay the debt normally within 12 months of moving into care.
House prices may fall during any deferment.
Whilst you incur no interest, you do lose out on interest which otherwise you would have earned by putting the proceeds of the sale either on deposit or into an investment.
The scheme only meets any shortfall between the cost of your care and all of your income except £22.60 per week England and Scotland or £23.00 per week in Wales Personal Expenditure Allowance you are allowed to keep. (2011/12) Therefore if your other non-property capital is very low your capital may become exhausted through normal expenditure forcing you into eventually selling the property.
Should the Local Authority agree to a Deferred Payments Scheme are only obliged they only have to meet any shortfall between the maximum cost the Local Authority is prepared to pay for the level of care required, (the so called contract rate and not necessarily the cost your chosen or preferred care home) and all of your income except the Personal Expenditure Allowance you are allowed to keep. Therefore your family may still have to pay a top up if you chose a more expensive home unless the Local Authority does in fact agree at their discretion to allow you to roll up any extra.
Whilst you may be allowed to rent out the property under a Deferred Payments scheme, the income you receive may not increase at the same rate as care fees and if care coincides with a period of low rental demand or economic recession you may find it difficult or even impossible to increase the rent to meet annual increases in care costs.

Should you be declined or just decide that this isn’t for you will need to consider other options see paying for care.