The loan will have interest charged on it in the same way a normal loan would be charged on money borrowed from a bank. The maximum interest rate that will be charged is fixed by the Government. It is based on the cost of central Government borrowing, and will routinely change on 1 January and 1 July every year.
The rate applicable is 1.45 per cent from 1 January 2018 to 30 June 2018. This interest will be compounded on a daily basis. The interest will apply from the day you enter into the Deferred Payment Scheme.
You will receive statements annually as a minimum, advising you how your charge is being calculated and what the outstanding sum on your deferred payment account is.
Your agreement with us
If you decide to use the Deferred Payments Scheme, you enter into a legal agreement with us by signing an agreement document. We then place a ‘legal charge’ on your property to safeguard the loan which is included in the administration costs for setting up the agreement.
The agreement covers both our responsibilities and your responsibilities. For example, you will have to make sure that your home is insured and maintained. If you incur expenses in maintaining your home while you are in a care home, these will be allowed for in the amount that you are assessed as contributing each week from your capital and income.
You can end the agreement at any time (for example, if you sell your home) and the loan, the interest and any legal and administrative charges relating to it then become payable immediately.
Otherwise the agreement ends when you no longer need to receive care services and the finances tied up in your home are released by your estate to repay the loan.