How is penalty interest calculated when a buyer is in breach of contract?

DivaDebs | 20:27 Mon 24th Oct 2005 | Business & Finance

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Can someone please tell what happens when a buyer has exchanged contracts on a property, but has not released the funds? I know the seller is entitled to penalty interest, but how is this calculated? It surely can't be daily on the price of the house!! That would be about 10k a day on a 145k house!! Thanks for your help - I'm MOST stressed! (I'm the seller, by the way... so probably not as stressed as the buyer..!)

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Didwot

The interest rate is set by the contract, and should not be at a penalty rate, but at a proper rate that will compensate the seller for being kept ou tof his money. The usual rate is 2% above bank rate which, on the figures you state, would produce a daily rate of interest of �25.28. The figure you come up with looks more like the amount of interest that would accrue in a whole year, or else you have used an interest rate of about 2,500%!

DivaDebs

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Ah I see! That seems much more like it! Thanks very much.

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