A mortgage is not automatically written off when a borrower dies. If relatives inherit an apartment, they also inherit the associated loan obligations. However, a bank cannot demand immediate, full repayment of the mortgage solely because the borrower has died, according to Kazakhstan’s Agency for Regulation and Development of the Financial Market (ARDFM).
The agency explained that, under Kazakhstan’s Civil Code, heirs inherit not only the deceased’s property but also the related rights and obligations. This applies to mortgaged real estate, which remains pledged to the bank until the loan obligations are fully discharged.
How much must heirs pay?
By accepting an inheritance, heirs assume liability for the deceased’s debts. The bank may demand repayment, but each heir’s liability is limited to the value of the assets they inherit.
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For example, if the inherited property is worth less than the outstanding mortgage balance, an heir is not required to cover the deceased’s debt beyond the value of the inherited assets.
Creditors may also file claims against the executor of a will or the administrator of the estate, where applicable.
If heirs have accepted the inheritance but failed to register their ownership of the property, the bank may ask a court to compel them to complete the registration.
Can the bank seize a mortgaged apartment?
The borrower’s death does not terminate the mortgage. The apartment remains pledged to the bank until the loan obligations are fulfilled.
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The bank therefore retains the right to initiate foreclosure on the property. However, any such proceedings must comply with the law, the terms of the credit and mortgage agreements, and the circumstances of the case.
A borrower’s death alone does not give the bank an unconditional right to demand early repayment of the entire outstanding balance. Such a demand is permissible only in cases provided for by law or the credit agreement.
What happens to the mortgage during the inheritance process?
Under the law, heirs generally have six months from the opening of the inheritance to accept it. During this period, the bank should consider suspending the accrual of interest, fines, penalties and other charges related to late payments. This allows time to identify the heirs and complete the inheritance process.
The ARDFM does not require these charges to be canceled automatically. Instead, the bank is expected to review the circumstances and consider whether suspending them is appropriate.
Once the inheritance has been accepted, mortgage payments must continue in accordance with the credit agreement, payment schedule and mortgage contract.
What if there are no heirs or they renounce the inheritance?
If there are no heirs under the law or a will, or if all potential heirs renounce the inheritance, the property may be classified as escheat property.
In such cases, the property passes into municipal ownership in the jurisdiction where the inheritance opened. However, the deceased’s debt to the bank does not automatically disappear. The creditor retains the right to pursue claims within the limits and through the procedures established by law.
If the deceased had co-borrowers, their obligations remain in force to the extent specified in the credit agreement.
Guarantees and suretyships generally terminate along with the underlying obligation they secure, unless the law or the relevant agreement provides otherwise. Other statutory grounds for termination may also apply.
