An assumption, in its broadest sense, refers to two primary contexts:
- In Finance, it is the act of taking over an existing mortgage by a new borrower.
- In General Terms, it is a belief or statement taken for granted without evidence.
Financial Assumptions
Definition and Mechanism
In financial contexts, particularly mortgages, an assumption occurs when a new borrower takes over an existing mortgage from the original borrower. The new borrower agrees to take on the remaining payments under the mortgage’s original terms. This process can benefit both parties; the seller may be released from the mortgage liability, while the buyer gains access to potentially favorable loan terms.
Special Considerations
- Qualifying Criteria: The new borrower must usually qualify under the lender’s criteria to assume a loan.
- Due-on-Sale Clause: Many modern mortgages contain this clause, preventing the transfer of mortgages without the lender’s consent.
- Types of Assumable Loans: Typically, FHA, VA, and USDA loans are assumable, whereas conventional loans may not be unless explicitly stated.
Example
Consider Jane, who has a mortgage with an interest rate lower than the present market rate. She sells her house to Bob, who chooses to assume her mortgage. Bob goes through the lender’s qualification process, takes over the mortgage, and benefits from Jane’s lower interest rate.
Philosophical and General Assumptions
Definition and Implications
An assumption in general parlance is an unverified belief or statement accepted as true. Such assumptions form the basis of hypotheses, theories, and arguments.
Types of Assumptions
- Implicit Assumptions: Not openly stated but understood in the context of discussion.
- Explicit Assumptions: Clearly articulated within a statement or argument.
- Presuppositions: Fundamental beliefs or statements taken for granted in logical reasoning.
Historical Context
The concept of assumption has been crucial throughout history in philosophical discourse and scientific exploration. Ideas and hypotheses often begin as assumptions that are eventually tested and either validated or refuted.
Examples
- Scientific Hypotheses: Assumptions in early scientific models, such as the geocentric model of the universe.
- Logical Arguments: Assuming “All humans are mortal” in deductive reasoning.
Applicability in Various Fields
- Economics: Assumptions about market behavior (e.g., rational behavior, perfect information) are foundational in economic models.
- Science and Technology: Assumptions underpin hypotheses that guide research until empirical evidence supports or refutes them.
- Law: Assumptions about legal principles and interpretive methods are critical in developing legal arguments and jurisprudence.
Related Terms
- Hypothesis: A tentative explanation based on assumptions to be tested.
- Premise: A statement or assumption on which an argument is based.
- Inference: A logical conclusion drawn from premises or assumptions.
FAQs
What are the risks associated with mortgage assumptions?
How do assumptions impact scientific research?
References
- “Mortgage Assumptions: A Guide” – Financial Analysis Journal.
- “The Role of Assumptions in Scientific Hypotheses” – Journal of Theoretical Science.
- “Logical Frameworks and Assumptions in Philosophy” – Philosophical Review.
Summary
Assumptions play a crucial role in both financial transactions and broader intellectual frameworks. In finance, they provide a means to transfer favorable loan terms, while in philosophical and general contexts, they form the foundational beliefs underpinning theories and arguments. Understanding assumptions’ nature, applicability, and implications helps in navigating various disciplines and making informed decisions.
This structured entry provides a comprehensive look at the term “Assumption,” ensuring readers gain in-depth understanding across different contexts.
