Civil law is a legal system originating in Italy and France that has been adopted in large parts of the world. Modern civil law stems mainly from the Napoleonic Code of the early 19th century, and it is a continuation of ancient Roman law . Its core principles are codified into a referable system, which serves as the primary source of law.
115-402: A mortgage loan or simply mortgage ( / ˈ m ɔːr ɡ ɪ dʒ / ), in civil law jurisdictions known also as a hypothec loan , is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any purpose while putting a lien on the property being mortgaged. The loan is " secured " on the borrower's property through
230-462: A floating rate or variable rate mortgage ). In some countries, such as the United States, fixed rate mortgages are the norm, but floating rate mortgages are relatively common. Combinations of fixed and floating rate mortgages are also common, whereby a mortgage loan will have a fixed rate for some period, for example the first five years, and vary after the end of that period. The charge to
345-457: A personal equity plan (PEP) mortgage, Individual Savings Account (ISA) mortgage or pension mortgage . Historically, investment-backed mortgages offered various tax advantages over repayment mortgages, although this is no longer the case in the UK. Investment-backed mortgages are seen as higher risk as they are dependent on the investment making sufficient return to clear the debt. Until recently it
460-415: A savings account , monthly home mortgage payments, monthly insurance payments and pension payments. Annuities can be classified by the frequency of payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other regular interval of time. Annuities may be calculated by mathematical functions known as "annuity functions". An annuity which provides for payments for
575-493: A standard form contract Multistate Fixed-Rate Note 3200 and also separate security instrument mortgage forms which vary by state. In Canada, the Canada Mortgage and Housing Corporation (CMHC) is the country's national housing agency, providing mortgage loan insurance, mortgage-backed securities, housing policy and programs, and housing research to Canadians. It was created by the federal government in 1946 to address
690-521: A certain term, but the outstanding principal balance is due at some point short of that term, and at the end of the term a balloon payment is due. When interest rates are high relative to the rate on an existing seller's loan, the buyer can consider assuming the seller's mortgage . A wraparound mortgage is a form of seller financing that can make it easier for a seller to sell a property. A biweekly mortgage has payments made every two weeks instead of monthly. Budget loans include taxes and insurance in
805-585: A civil code whose interpretations rely on both the civil and common law systems. Because Puerto Rico 's Civil Code is based on the Spanish Civil Code of 1889, available jurisprudence has tended to rely on common law innovations due to the code's age and in many cases, obsolete nature. Several Islamic countries have civil law systems that contain elements of Islamic law . As an example, the Egyptian Civil Code of 1810 that developed in
920-611: A civil law code is the Napoleonic Code (1804), named after French emperor Napoleon . The Napoleonic code comprises three components: Another prominent civil code is the German Civil Code ( Bürgerliches Gesetzbuch or BGB), which went into effect in the German empire in 1900. The German Civil Code is highly influential, inspiring the civil codes in countries such as Japan, South Korea and Switzerland (1907). It
1035-708: A civil law is the group of legal ideas and systems ultimately derived from the Corpus Juris Civilis , but heavily overlain by Napoleonic , Germanic , canonical , feudal, and local practices, as well as doctrinal strains such as natural law , codification, and legal positivism . The Napoleonic Code is the most widespread system of law in the world, in force in various forms in about 120 countries. Conceptually, civil law proceeds from abstractions, formulates general principles, and distinguishes substantive rules from procedural rules . It holds case law secondary and subordinate to statutory law . Civil law
1150-646: A credit line. In the U.S. a partial amortization or balloon loan is one where the amount of monthly payments due are calculated (amortized) over a certain term, but the outstanding balance on the principal is due at some point short of that term. In the UK, a partial repayment mortgage is quite common, especially where the original mortgage was investment-backed. Graduated payment mortgage loans have increasing costs over time and are geared to young borrowers who expect wage increases over time. Balloon payment mortgages have only partial amortization, meaning that amount of monthly payments due are calculated (amortized) over
1265-407: A financial institution, such as a bank , credit union or building society , depending on the country concerned, and the loan arrangements can be made either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably. The lender's rights over
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#17327808215811380-509: A higher risk tolerance and do so knowing that they face more challenge in reselling the loan. Many countries have similar concepts or agencies that define what are "standard" mortgages. Regulated lenders (such as banks) may be subject to limits or higher-risk weightings for non-standard mortgages. For example, banks and mortgage brokerages in Canada face restrictions on lending more than 80% of the property value; beyond this level, mortgage insurance
1495-452: A key concept as it often defines whether or not the mortgage can be easily sold or securitized, or, if non-standard, may affect the price at which it may be sold. In the United States, a conforming mortgage is one which meets the established rules and procedures of the two major government-sponsored entities in the housing finance market (including some legal requirements). In contrast, lenders who decide to make nonconforming loans are exercising
1610-445: A loan. Builders may take out blanket loans which cover several properties at once. Bridge loans may be used as temporary financing pending a longer-term loan. Hard money loans provide financing in exchange for the mortgaging of real estate collateral. In most jurisdictions, a lender may foreclose the mortgaged property if certain conditions occur – principally, non-payment of the mortgage loan. Subject to local legal requirements,
1725-579: A mixture of French and German civil law in the 19th century. After the reunification of Poland in 1918, five legal systems (French Napoleonic Code from the Duchy of Warsaw , German BGB from Western Poland, Austrian ABGB from Southern Poland, Russian law from Eastern Poland, and Hungarian law from Spisz and Orawa ) were merged into one. Similarly, Dutch law , while originally codified in the Napoleonic tradition, has been heavily altered under influence from
1840-480: A mortgage occurs when an owner (usually of a fee simple / freehold interest in real property , but frequently leasehold in England and Wales) pledges his or her interest (right to the property) as security or collateral for a loan. Therefore, a mortgage is an encumbrance (limitation) on the right to the property just as an easement would be, but because most mortgages occur as a condition for new loan money,
1955-465: A nominal annual interest rate of 9% and monthly payments of $ 100 can be calculated by: In Excel, the PV and FV functions take on optional fifth argument which selects from annuity-immediate or annuity-due. An annuity-due with n payments is the sum of one annuity payment now and an ordinary annuity with one payment less, and also equal, with a time shift, to an ordinary annuity. Thus we have: A perpetuity
2070-399: A notion of standard or conforming mortgages that define a perceived acceptable level of risk, which may be formal or informal, and may be reinforced by laws, government intervention, or market practice. For example, a standard mortgage may be considered to be one with no more than 70–80% LTV and no more than one-third of gross income going to mortgage debt. A standard or conforming mortgage is
2185-444: A number of more or less standard measures of creditworthiness may be used. Common measures include payment to income (mortgage payments as a percentage of gross or net income); debt to income (all debt payments, including mortgage payments, as a percentage of income); and various net worth measures. In many countries, credit scores are used in lieu of or to supplement these measures. There will also be requirements for documentation of
2300-522: A number of years and then become contingent on the annuitant being alive. An annuity that begins payments only after a period is a deferred annuity (usually after retirement). An annuity that begins payments as soon as the customer has paid, without a deferral period is an immediate annuity . Valuation of an annuity entails calculation of the present value of the future annuity payments. The valuation of an annuity entails concepts such as time value of money , interest rate , and future value . If
2415-406: A payment is made immediately on issue. Annuities that provide payments that will be paid over a period known in advance are annuities certain or guaranteed annuities. Annuities paid only under certain circumstances are contingent annuities . A common example is a life annuity , which is paid over the remaining lifetime of the annuitant. Certain and life annuities are guaranteed to be paid for
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#17327808215812530-410: A phenomenal number of reported legal opinions . However, this tends to be uncontrolled, since there is no statutory requirement that any case be reported or published in a law report , except for the councils of state and constitutional courts. Except for the highest courts, all publication of legal opinions is unofficial or commercial. Civil law systems can be divided into: A prominent example of
2645-561: A process known as mortgage origination . This means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property (" foreclosure " or " repossession ") to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms. The word mortgage is derived from a Law French term used in Britain in the Middle Ages meaning "death pledge" and refers to
2760-470: Is an annuity for which the payments continue forever. Observe that Therefore a perpetuity has a finite present value when there is a non-zero discount rate. The formulae for a perpetuity are where i {\displaystyle i} is the interest rate and d = i 1 + i {\displaystyle d={\frac {i}{1+i}}} is the effective discount rate. Valuation of life annuities may be performed by calculating
2875-729: Is based heavily on the French and Spanish codes, as opposed to English common law . In Louisiana, private law was codified into the Louisiana Civil Code . Current Louisiana law has converged considerably with American law, especially in its public law , judicial system, and adoption of the Uniform Commercial Code (except for Article 2) and certain legal devices of American common law. In fact, any innovation, whether private or public, has been decidedly common law in origin. In theory, codes conceptualized in
2990-405: Is common in the UK, especially when associated with a regular investment plan. With this arrangement regular contributions are made to a separate investment plan designed to build up a lump sum to repay the mortgage at maturity. This type of arrangement is called an investment-backed mortgage or is often related to the type of plan used: endowment mortgage if an endowment policy is used, similarly
3105-585: Is considered mainly influenced by the German civil code and partly influenced by the French civil code. The civil code of the Republic of Turkey is a slightly modified version of the Swiss code, adopted in 1926 during Mustafa Kemal Atatürk 's presidency as part of the government's progressive reforms and secularization. Some systems of civil law do not fit neatly into this typology, however. Polish law developed as
3220-447: Is creeping into civil law jurisprudence , and is generally seen in many nations' highest courts. Some authors consider civil law the foundation for socialist law used in communist countries, which in this view would basically be civil law with the addition of Marxist-Leninist ideals. Even if this is so, civil law was generally the legal system in place before the rise of socialist law, and some Eastern European countries reverted to
3335-445: Is divided into five parts: Civil law takes as its major inspiration classical Roman law ( c . AD 1–250), and in particular Justinian law (6th century AD), and further expanded and developed in the late Middle Ages under the influence of canon law . The Justinian Code's doctrines provided a sophisticated model for contracts , rules of procedure, family law , wills, and a strong monarchical constitutional system. Roman law
3450-424: Is earned before being paid. Annuity due refers to a series of equal payments made at the same interval at the beginning of each period. Periods can be monthly, quarterly, semi-annually, annually, or any other defined period. Examples of annuity due payments include rentals, leases, and insurance payments, which are made to cover services provided in the period following the payment. The present value of an annuity
3565-425: Is for repaying a debt P with interest, the amount owed after n payments is Because the scheme is equivalent with borrowing the amount R i {\displaystyle {\frac {R}{i}}} to create a perpetuity with coupon R {\displaystyle R} , and putting R i − P {\displaystyle {\frac {R}{i}}-P} of that borrowed amount in
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3680-412: Is generally required. In some countries with currencies that tend to depreciate, foreign currency mortgages are common, enabling lenders to lend in a stable foreign currency, whilst the borrower takes on the currency risk that the currency will depreciate and they will therefore need to convert higher amounts of the domestic currency to repay the loan. In addition to the two standard means of setting
3795-410: Is linear in the amount of payments, therefore the future value for payments, or rent R {\displaystyle R} is: Example: The present value of a 5-year annuity with a nominal annual interest rate of 12% and monthly payments of $ 100 is: The rent is understood as either the amount paid at the end of each period in return for an amount PV borrowed at time zero, the principal of
3910-482: Is often paired with the inquisitorial system , but the terms are not synonymous. There are key differences between a statute and a code. The most pronounced features of civil systems are their legal codes , with concise and broadly applicable texts that typically avoid factually specific scenarios. The short articles in a civil law code deal in generalities and stand in contrast with ordinary statutes, which are often very long and very detailed. The civil law system
4025-401: Is the accumulated amount, including payments and interest, of a stream of payments made to an interest-bearing account. For an annuity-immediate, it is the value immediately after the n-th payment. The future value is given by: where n {\displaystyle n} is the number of terms and i {\displaystyle i} is the per period interest rate. Future value
4140-464: Is the comprehensive codification of received Roman law, i.e., its inclusion in civil codes. The earliest codification known is the Code of Hammurabi , written in ancient Babylon during the 18th century BC. However, this, and many of the codes that followed, were mainly lists of civil and criminal wrongs and their punishments. The codification typical of modern civilian systems did not first appear until
4255-418: Is the most widespread system of law in the world, in force in various forms in about 150 countries. Civil law is sometimes referred to as neo-Roman law, Romano-Germanic law or Continental law. The expression "civil law" is a translation of Latin jus civile , or "citizens' law", which was the late imperial term for its legal system, as opposed to the laws governing conquered peoples ( jus gentium ); hence,
4370-423: Is the number of terms, i {\displaystyle i} is the per-term interest rate, and d {\displaystyle d} is the effective rate of discount given by d = i i + 1 {\displaystyle d={\frac {i}{i+1}}} . The future and present values for annuities due are related since: Example: The final value of a 7-year annuity-due with
4485-532: Is the primary mechanism used in many countries to finance private ownership of residential and commercial property (see commercial mortgages ). Although the terminology and precise forms will differ from country to country, the basic components tend to be similar: Many other specific characteristics are common to many markets, but the above are the essential features. Governments usually regulate many aspects of mortgage lending, either directly (through legal requirements, for example) or indirectly (through regulation of
4600-432: Is the value of a stream of payments, discounted by the interest rate to account for the fact that payments are being made at various moments in the future. The present value is given in actuarial notation by: where n {\displaystyle n} is the number of terms and i {\displaystyle i} is the per period interest rate. Present value is linear in the amount of payments, therefore
4715-432: Is to make regular payments toward the principal and interest over a set term, commonly referred to as (self) amortization in the U.S. and as a repayment mortgage in the UK. A mortgage is a form of annuity (from the perspective of the lender), and the calculation of the periodic payments is based on the time value of money formulas. Certain details may be specific to different locations: interest may be calculated on
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4830-401: The 2010 foreclosure crisis . In the United States, the mortgage loan involves two separate documents: the mortgage note (a promissory note ) and the security interest evidenced by the "mortgage" document; generally, the two are assigned together, but if they are split traditionally the holder of the note and not the mortgage has the right to foreclose. For example, Fannie Mae promulgates
4945-556: The Bordeaux trade. Consequently, neither of the two waves of Roman influence completely dominated in Europe. Roman law was ultimately a secondary source that was applied only when local customs and laws were found lacking on a certain subject. However, after a time, even local law came to be interpreted and evaluated primarily on the basis of Roman law, since it was a common European legal tradition of sorts, and thereby in turn influenced
5060-689: The Federal National Mortgage Association (known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (known as Freddie Mac). The US mortgage sector has been the center of major financial crises over the last century. Unsound lending practices resulted in the National Mortgage Crisis of the 1930s , the savings and loan crisis of the 1980s and 1990s and the subprime mortgage crisis of 2007 which led to
5175-564: The Napoleonic Code expressly forbade French judges to pronounce general principles of law. There is no doctrine of stare decisis in the French civil law tradition. There are regular, good quality law reports in France, but it is not a consistent practice in many of the existing civil law jurisdictions. In French-speaking colonial Africa there were no law reports and what little is known of those historical cases comes from publication in journals. Civil law codes must be changed constantly because
5290-526: The Netherlands (1838), Serbia (1844), Italy and Romania (1865), Portugal (1867) and Spain (1888). Germany (1900), and Switzerland (1912) adopted their own codifications. These codifications were in turn imported into colonies at one time or another by most of these countries. The Swiss version was adopted in Brazil (1916) and Turkey (1926). Louisiana is the only U.S. state whose private civil law
5405-444: The actuarial present value of the future life contingent payments. Life tables are used to calculate the probability that the annuitant lives to each future payment period. Valuation of life annuities also depends on the timing of payments just as with annuities certain, however life annuities may not be calculated with similar formulas because actuarial present value accounts for the probability of death at each age. If an annuity
5520-414: The cost of a mortgage loan (fixed at a set interest rate for the term, or variable relative to market interest rates), there are variations in how that cost is paid, and how the loan itself is repaid. Repayment depends on locality, tax laws and prevailing culture. There are also various mortgage repayment structures to suit different types of borrower. The most common way to repay a secured mortgage loan
5635-429: The following formula : A = P ⋅ r ( 1 + r ) n ( 1 + r ) n − 1 {\displaystyle A=P\cdot {\frac {r(1+r)^{n}}{(1+r)^{n}-1}}} where: The main alternative to a principal and interest mortgage is an interest-only mortgage , where the principal is not repaid throughout the term. This type of mortgage
5750-400: The k -th payment R would be R ( 1 + i ) k {\displaystyle {\frac {R}{(1+i)^{k}}}} . Just considering R to be 1, then: which gives us the result as required. Similarly, we can prove the formula for the future value. The payment made at the end of the last year would accumulate no interest and the payment made at the end of
5865-752: The legal system of Japan , beginning in the Meiji Era , European legal systems—especially the civil law of Germany and France—were the primary models for emulation. In China, the German Civil Code was introduced in the later years of the Qing dynasty , emulating Japan. In addition, it formed the basis of the law of the Republic of China , which remains in force in Taiwan. Furthermore, Taiwan and Korea, former Japanese colonies, have been strongly influenced by
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#17327808215815980-454: The Dutch native tradition of Roman-Dutch law (still in effect in its former colonies). Scotland 's civil law tradition borrowed heavily from Roman-Dutch law. Swiss law is categorized as Germanistic, but it has been heavily influenced by the Napoleonic tradition, with some indigenous elements added in as well. Quebec law, whose private law is also of French civil origin, has developed along
6095-484: The German civil code, roughly 30% from the French civil code, 8% from Japanese customary law, and 2% from English law . Regarding the latter, the code borrows the doctrine of ultra vires and the precedent of Hadley v Baxendale from English common law system. Some countries where civil law is practiced include: Annuity (finance theory) In investment , an annuity is a series of payments made at equal intervals. Examples of annuities are regular deposits to
6210-476: The HECM (Home Equity Conversion Mortgage). Unlike standard mortgages (where the entire loan amount is typically disbursed at the time of loan closing) the HECM program allows the homeowner to receive funds in a variety of ways: as a one time lump sum payment; as a monthly tenure payment which continues until the borrower dies or moves out of the house permanently; as a monthly payment over a defined period of time; or as
6325-655: The Japanese legal system. Civil law is primarily contrasted with the English common law that influenced the legal traditions of the English-speaking countries. The primary contrast between the two systems is the role of written decisions and precedent as a source of law (one of the defining features of common law legal systems). While common law systems place great weight on precedent, civil law judges tend to give less weight to judicial precedent. For example,
6440-542: The Justinian Code's title Corpus Juris Civilis . Civil law practitioners, however, traditionally refer to their system in a broad sense as jus commune . It draws heavily from Roman law, arguably the most intricate known legal system before the modern era. In civil law legal systems where codes exist, the primary source of law is the law code , a systematic collection of interrelated articles, arranged by subject matter in some pre-specified order. Codes explain
6555-504: The Justinian Code. Germanic codes appeared over the 6th and 7th centuries to clearly delineate the law in force for Germanic privileged classes versus their Roman subjects and regulate those laws according to folk-right . Under feudal law, a number of private custumals were compiled, first under the Norman empire ( Très ancien coutumier , 1200–1245), then elsewhere, to record the manorial —and later regional—customs, court decisions, and
6670-405: The UK and U.S., 25 to 30 years is the usual maximum term (although shorter periods, such as 15-year mortgage loans, are common). Mortgage payments, which are typically made monthly, contain a repayment of the principal and an interest element. The amount going toward the principal in each payment varies throughout the term of the mortgage. In the early years the repayments are mostly interest. Towards
6785-475: The UN Economic Commission for Europe compared German, US, and Danish mortgage systems. The German Bausparkassen (savings and loans associations) reported nominal interest rates of approximately 6 per cent per annum in the last 40 years (as of 2004). Bausparkassen are not identical with banks that give mortgages. In addition, they charge administration and service fees (about 1.5 per cent of
6900-624: The US, foreign nationals due to their unique situation face Foreign National mortgage conditions. Flexible mortgages allow for more freedom by the borrower to skip payments or prepay. Offset mortgages allow deposits to be counted against the mortgage loan. In the UK there is also the endowment mortgage where the borrowers pay interest while the principal is paid with a life insurance policy. Commercial mortgages typically have different interest rates, risks, and contracts than personal loans. Participation mortgages allow multiple investors to share in
7015-420: The United States, U.S. states began codification with New York's 1850 Field Code (laying down civil procedure rules and inspired by European and Louisiana codes). Other examples include California's codes (1872), and the federal revised statutes (1874) and the current United States Code (1926), which are closer to compilations of statute than to systematic expositions of law akin to civil law codes. For
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#17327808215817130-438: The applicant has provided as to income, employment, credit history and the value of the home being purchased via an appraisal. An appraisal may be ordered. The underwriting process may take a few days to a few weeks. Sometimes the underwriting process takes so long that the provided financial statements need to be resubmitted so they are current. It is advisable to maintain the same employment and not to use or open new credit during
7245-454: The bank to grow with interest i {\displaystyle i} . Also, this can be thought of as the present value of the remaining payments See also fixed rate mortgage . Formula for finding the periodic payment R , given A : Examples: Find PVOA factor as. 1) find r as, (1 ÷ 1.15)= 0.8695652174 2) find r × ( r − 1) ÷ ( r − 1) 08695652174 × (−0.3424837676)÷ (−1304347826) = 2.2832251175 70000÷ 2.2832251175= $ 30658.3873
7360-422: The basis of a 360-day year, for example; interest may be compounded daily, yearly, or semi-annually; prepayment penalties may apply; and other factors. There may be legal restrictions on certain matters, and consumer protection laws may specify or prohibit certain practices. Depending on the size of the loan and the prevailing practice in the country the term may be short (10 years) or long (50 years plus). In
7475-405: The borrower depends upon the credit risk in addition to the interest rate risk. The mortgage origination and underwriting process involves checking credit scores, debt-to-income, downpayments (deposits), assets, and assessing property value. Jumbo mortgages and subprime lending are not supported by government guarantees and face higher interest rates. Other innovations described below can affect
7590-592: The civil law system should go beyond the compilation of discrete statutes, and instead state the law in a coherent, and comprehensive piece of legislation, sometimes introducing major reforms or starting anew. In this regard, civil law codes are more similar to the Restatements of the Law , the Uniform Commercial Code (which drew from European inspirations), and the Model Penal Code in the United States. In
7705-562: The code sets out general principles as rules of law. While the typical French-speaking supreme court decision is short, concise and devoid of explanation or justification, in Germanic Europe , the supreme courts can and do tend to write more verbose opinions, supported by legal reasoning. A line of similar case decisions, while not precedent per se , constitute jurisprudence constante . While civil law jurisdictions place little reliance on court decisions, they tend to generate
7820-467: The codification of Continental European private laws moved forward. Codifications were completed by Denmark (1687), Sweden (1734), Prussia (1794), France (1804), and Austria (1811). The French codes were imported into areas conquered by Napoleon and later adopted with modifications in Poland ( Duchy of Warsaw / Congress Poland ; Kodeks cywilny 1806/1825), Louisiana (1807), Canton of Vaud (Switzerland; 1819),
7935-476: The country's post-war housing shortage, and to help Canadians achieve their homeownership goals. Civil law (legal system) The civil law system is often contrasted with the common law system, which originated in medieval England . Whereas the civil law takes the form of legal codes, the common law comes from uncodified case law that arises as a result of judicial decisions, recognising prior court decisions as legally binding precedent . Historically,
8050-429: The creditworthiness, such as income tax returns, pay stubs, etc. the specifics will vary from location to location. Income tax incentives usually can be applied in forms of tax refunds or tax deduction schemes. The first implies that income tax paid by individual taxpayers will be refunded to the extent of interest on mortgage loans taken to acquire residential property. Income tax deduction implies lowering tax liability to
8165-538: The criteria on new lending on an interest-only basis. The problem for many people has been the fact that no repayment vehicle had been implemented, or the vehicle itself (e.g. endowment/ISA policy) performed poorly and therefore insufficient funds were available to repay balance at the end of the term. Moving forward, the FSA under the Mortgage Market Review (MMR) have stated there must be strict criteria on
8280-484: The debt each year. These arrangements are variously called reverse mortgages , lifetime mortgages or equity release mortgages (referring to home equity ), depending on the country. The loans are typically not repaid until the borrowers are deceased, hence the age restriction. Through the Federal Housing Administration , the U.S. government insures reverse mortgages via a program called
8395-422: The demand for home ownership is highest, strong domestic markets for mortgages have developed. Mortgages can either be funded through the banking sector (that is, through short-term deposits) or through the capital markets through a process called "securitization", which converts pools of mortgages into fungible bonds that can be sold to investors in small denominations. According to Anglo-American property law ,
8510-599: The early 19th century—which remains in force in Egypt is the basis for the civil law in many countries of the Arab world where the civil law is used— is based on the Napoleonic Code, but its primary author Abd El-Razzak El-Sanhuri attempted to integrate principles and features of Islamic law in deference to the unique circumstances of Egyptian society. Japanese Civil Code is considered a mixture drawing roughly 60% from
8625-431: The end of the mortgage, payments are mostly for principal. In this way, the payment amount determined at outset is calculated to ensure the loan is repaid at a specified date in the future. This gives borrowers assurance that by maintaining repayment the loan will be cleared at a specified date if the interest rate does not change. Some lenders and 3rd parties offer a bi-weekly mortgage payment program designed to accelerate
8740-568: The extent of interest rate paid for the mortgage loan. Some lenders may also require a potential borrower have one or more months of "reserve assets" available. In other words, the borrower may be required to show the availability of enough assets to pay for the housing costs (including mortgage, taxes, etc.) for a period of time in the event of the job loss or other loss of income. Many countries have lower requirements for certain borrowers, or "no-doc" / "low-doc" lending standards that may be acceptable under certain circumstances. Many countries have
8855-470: The first year would accumulate interest for a total of ( n − 1) years. Therefore, An annuity-due is an annuity whose payments are made at the beginning of each period. Deposits in savings, rent or lease payments, and insurance premiums are examples of annuities due. Each annuity payment is allowed to compound for one extra period. Thus, the present and future values of an annuity-due can be calculated. where n {\displaystyle n}
8970-406: The funds will be repaid (usually considered a function of the creditworthiness of the borrower); that if they are not repaid, the lender will be able to foreclose on the real estate assets; and the financial, interest rate risk and time delays that may be involved in certain circumstances. During the mortgage loan approval process, a mortgage loan underwriter verifies the financial information that
9085-457: The higher the LTV, the higher the risk that the value of the property (in case of foreclosure) will be insufficient to cover the remaining principal of the loan. Since the value of the property is an important factor in understanding the risk of the loan, determining the value is a key factor in mortgage lending. The value may be determined in various ways, but the most common are: In most countries,
9200-577: The judiciary was not empowered to adjudicate under the established principles of the common law of contracts - they could only apply the code as written. Codification , however, is by no means a defining characteristic of a civil law system. For example, the statutes that govern the civil law systems of Sweden and other Nordic countries and the Roman-Dutch countries are not grouped into larger, expansive codes like those in French and German law. In actual practice, an increasing degree of precedent
9315-616: The land for their realms, as when Charles VII of France in 1454 commissioned an official custumal of Crown law. Two prominent examples include the Coutume de Paris (written 1510; revised 1580), which served as the basis for the Napoleonic Code, and the Sachsenspiegel (c. 1220) of the bishoprics of Magdeburg and Halberstadt which was used in northern Germany, Poland, and the Low Countries . The concept of codification
9430-708: The late medieval period, its laws became widely implemented in the West. It was first received in the Holy Roman Empire partly because it was considered imperial law , and it spread in Europe mainly because its students were the only trained lawyers. It became the basis of Scots law , though partly rivaled by received feudal Norman law . In England, it was taught academically at the universities of Oxford and Cambridge , but underlay only probate and matrimonial law insofar as both were inherited from canon law, and maritime law , adapted from lex mercatoria through
9545-400: The legal principles underpinning them. Custumals were commissioned by lords who presided as lay judges over manorial courts in order to inform themselves about the court process. The use of custumals from influential towns soon became commonplace over large areas. In keeping with this, certain monarchs consolidated their kingdoms by attempting to compile custumals that would serve as the law of
9660-413: The lenders borrow money, therefore, affects the cost of borrowing. Lenders may also, in many countries, sell the mortgage loan to other parties who are interested in receiving the stream of cash payments from the borrower, often in the form of a security (by means of a securitization ). Mortgage lending will also take into account the (perceived) riskiness of the mortgage loan, that is, the likelihood that
9775-409: The loan against the value of the property. Therefore, a mortgage loan in which the purchaser has made a down payment of 20% has a loan to value ratio of 80%. For loans made against properties that the borrower already owns, the loan to value ratio will be imputed against the estimated value of the property. The loan to value ratio is considered an important indicator of the riskiness of a mortgage loan:
9890-534: The loan amount). However, in the United States, the average interest rates for fixed-rate mortgages in the housing market started in the tens and twenties in the 1980s and have (as of 2004) reached about 6 per cent per annum. However, gross borrowing costs are substantially higher than the nominal interest rate and amounted for the last 30 years to 10.46 per cent. In Denmark, similar to the United States mortgage market, interest rates have fallen to 6 per cent per annum. A risk and administration fee amounts to 0.5 per cent of
10005-405: The loan, or the amount paid out by an interest-bearing account at the end of each period when the amount PV is invested at time zero, and the account becomes zero with the n-th withdrawal. Future and present values are related since: and To calculate present value, the k -th payment must be discounted to the present by dividing by the interest, compounded by k terms. Hence the contribution of
10120-508: The main source of law. Eventually, the work of civilian glossators and commentators led to the development of a common body of law and writing about law, a common legal language, and a common method of teaching and scholarship, all termed the jus commune , or law common to Europe, which consolidated canon law and Roman law, and to some extent, feudal law . An important common characteristic of civil law, aside from its origins in Roman law,
10235-415: The mortgage payment; package loans add the costs of furnishings and other personal property to the mortgage. Buydown mortgages allow the seller or lender to pay something similar to points to reduce interest rate and encourage buyers. Homeowners can also take out equity loans in which they receive cash for a mortgage debt on their house. Shared appreciation mortgages are a form of equity release . In
10350-489: The mortgaged property apply, and may be tightly regulated by the relevant government. There are strict or judicial foreclosures and non-judicial foreclosures, also known as power of sale foreclosures. In some jurisdictions, foreclosure and sale can occur quite rapidly, while in others, foreclosure may take many months or even years. In many countries, the ability of lenders to foreclose is extremely limited, and mortgage market development has been notably slower. A study issued by
10465-407: The notion of a nation-state implied recorded law that would be applicable to that state. There was also a reaction to law codification. The proponents of codification regarded it as conducive to certainty, unity and systematic recording of the law; whereas its opponents claimed that codification would result in the ossification of the law. In the end, despite whatever resistance to codification,
10580-435: The number of payments is known in advance, the annuity is an annuity certain or guaranteed annuity . Valuation of annuities certain may be calculated using formulas depending on the timing of payments. If the payments are made at the end of the time periods, so that interest is accumulated before the payment, the annuity is called an annuity-immediate , or ordinary annuity . Mortgage payments are annuity-immediate, interest
10695-423: The options of paying the interest on a monthly basis. By paying off the interest means the balance will remain level for the rest of their life. This market is set to increase as more retirees require finance in retirement. For older borrowers (typically in retirement), it may be possible to arrange a mortgage where neither the principal nor interest is repaid. The interest is rolled up with the principal, increasing
10810-557: The original one of 1865, introducing German elements as a result of its World War II Axis alliance. This approach has been imitated by other countries, including Portugal (1966), the Netherlands (1992), Brazil (2002) and Argentina (2014). Most of them have innovations introduced by the Italian legislation, including the unification of the civil and commercial codes . Germanistic to Napoleonic influence : The Swiss civil code
10925-537: The outstanding debt. In addition, an acquisition fee is charged which amounts to one per cent of the principal. The mortgage industry of the United States is a major financial sector. The federal government created several programs, or government sponsored entities , to foster mortgage lending, construction and encourage home ownership . These programs include the Government National Mortgage Association (known as Ginnie Mae),
11040-435: The participants or the financial markets, such as the banking industry), and often through state intervention (direct lending by the government, direct lending by state-owned banks, or sponsorship of various entities). Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system. Mortgage loans are generally structured as long-term loans,
11155-400: The payoff of the loan. Similarly, a mortgage can be ended before its scheduled end by paying some or all of the remainder prematurely, called curtailment. An amortization schedule is typically worked out taking the principal left at the end of each month, multiplying by the monthly rate and then subtracting the monthly payment. This is typically generated by an amortization calculator using
11270-651: The periodic payments for which are similar to an annuity and calculated according to the time value of money formulae. The most basic arrangement would require a fixed monthly payment over a period of ten to thirty years, depending on local conditions. Over this period the principal component of the loan (the original loan) would be slowly paid down through amortization. In practice, many variants are possible and common worldwide and within each country. Lenders provide funds against property to earn interest income , and generally borrow these funds themselves (for example, by taking deposits or issuing bonds ). The price at which
11385-492: The pledge ending (dying) when either the obligation is fulfilled or the property is taken through foreclosure. A mortgage can also be described as "a borrower giving consideration in the form of a collateral for a benefit (loan)". Mortgage borrowers can be individuals mortgaging their home or they can be businesses mortgaging commercial property (for example, their own business premises, residential property let to tenants, or an investment portfolio ). The lender will typically be
11500-683: The pre-socialist civil law following the fall of socialism, while others continued using a socialist legal systems. The term civil law comes from English legal scholarship and is used in English-speaking countries to lump together all legal systems of the jus commune tradition. However, legal comparativists and economists promoting the legal origins theory prefer to subdivide civil law jurisdictions into distinct groups: However, some of these legal systems are often and more correctly said to be of hybrid nature: Napoleonic to Germanistic influence : The Italian civil code of 1942 replaced
11615-538: The precedent of courts is not binding and because courts lack authority to act if there is no statute. In some civil law jurisdictions the judiciary does not have the authority to invalidate legislative provisions . For example, after the fall of the Soviet Union , the Armenian Parliament , with substantial support from USAID , adopted new legal codes. Some of the codes introduced problems which
11730-425: The present value for payments, or rent R {\displaystyle R} is: In practice, often loans are stated per annum while interest is compounded and payments are made monthly. In this case, the interest I {\displaystyle I} is stated as a nominal interest rate , and i = I / 12 {\textstyle i=I/12} . The future value of an annuity
11845-404: The principles of law, rights and entitlements, and how basic legal mechanisms work. The purpose of codification is to provide all citizens with manners and written collection of the laws which apply to them and which judges must follow. Law codes are laws enacted by a legislature , even if they are in general much longer than other laws. Rather than a compendium of statutes or catalog of case law ,
11960-515: The property may then be sold. Any amounts received from the sale (net of costs) are applied to the original debt. In some jurisdictions, mortgage loans are non-recourse loans: if the funds recouped from sale of the mortgaged property are insufficient to cover the outstanding debt, the lender may not have recourse to the borrower after foreclosure. In other jurisdictions, the borrower remains responsible for any remaining debt. In virtually all jurisdictions, specific procedures for foreclosure and sale of
12075-404: The rates as well. Upon making a mortgage loan for the purchase of a property, lenders usually require that the borrower make a down payment (called a deposit in English law); that is, contribute a portion of the cost of the property. This down payment may be expressed as a portion of the value of the property (see below for a definition of this term). The loan to value ratio (or LTV) is the size of
12190-399: The remainder of a person's lifetime is a life annuity . An annuity which continues indefinitely is a perpetuity . Annuities may be classified in several ways. Payments of an annuity-immediate are made at the end of payment periods, so that interest accrues between the issue of the annuity and the first payment. Payments of an annuity-due are made at the beginning of payment periods, so
12305-431: The repayment vehicle being used. As such the likes of Nationwide and other lenders have pulled out of the interest-only market. A resurgence in the equity release market has been the introduction of interest-only lifetime mortgages. Where an interest-only mortgage has a fixed term, an interest-only lifetime mortgage will continue for the rest of the mortgagors life. These schemes have proved of interest to people who do like
12420-456: The roll-up effect (compounding) of interest on traditional equity release schemes. They have also proved beneficial to people who had an interest-only mortgage with no repayment vehicle and now need to settle the loan. These people can now effectively remortgage onto an interest-only lifetime mortgage to maintain continuity. Interest-only lifetime mortgage schemes are currently offered by two lenders – Stonehaven and more2life. They work by having
12535-539: The same lines, adapting in the same way as Louisiana to the public law and judicial system of Canadian common law . By contrast, Quebec private law has innovated mainly from civil sources. To a lesser extent, other states formerly part of the Spanish Empire, such as Texas and California, have also retained aspects of Spanish civil law into their legal system, for example community property . The legal system of Puerto Rico exhibits similarities to that of Louisiana:
12650-495: The secured property take priority over the borrower's other creditors , which means that if the borrower becomes bankrupt or insolvent , the other creditors will only be repaid the debts owed to them from a sale of the secured property if the mortgage lender is repaid in full first. In many jurisdictions, it is normal for home purchases to be funded by a mortgage loan. Few individuals have enough savings or liquid funds to enable them to purchase property outright. In countries where
12765-470: The underwriting process. Any changes made in the applicant's credit, employment, or financial information could result in the loan being denied. There are many types of mortgages used worldwide, but several factors broadly define the characteristics of the mortgage. All of these may be subject to local regulation and legal requirements. The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable-rate mortgage (ARM) (also known as
12880-425: The word mortgage has become the generic term for a loan secured by such real property . As with other types of loans, mortgages have an interest rate and are scheduled to amortize over a set period of time, typically 30 years in the United States. All types of real property can be, and usually are, secured with a mortgage and bear an interest rate that is supposed to reflect the lender's risk. Mortgage lending
12995-478: Was further developed during the 17th and 18th centuries AD, as an expression of both natural law and the ideas of the Enlightenment . The political ideals of that era was expressed by the concepts of democracy , protection of property and the rule of law . Those ideals required certainty of law; recorded, uniform law. So, the mix of Roman law and customary and local law gave way to law codification. Also,
13110-416: Was not uncommon for interest only mortgages to be arranged without a repayment vehicle, with the borrower gambling that the property market will rise sufficiently for the loan to be repaid by trading down at retirement (or when rent on the property and inflation combine to surpass the interest rate). Recent Financial Services Authority guidelines to UK lenders regarding interest-only mortgages have tightened
13225-638: Was received differently in different countries. In some it went into force wholesale by legislative act, i.e., it became positive law , whereas in others it was diffused into society by increasingly influential legal experts and scholars. Roman law continued without interruption in the Eastern Roman Empire until its final fall in the 15th century. However, given the empire's influence on the continent in Late Antiquity and then multiple incursions and occupations by Western European powers in
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