Lombard loan from €1.5 million: raising capital for property in Spain with securities backed lending
With a securities-backed loan your securities portfolio stays invested and serves the bank as collateral. The rate is Euribor plus a margin, and we arrange it from €1.5 million. Here is how it works, what it costs and what happens when prices fall.
Lombard loan interest rate: how is it set, and from what amount do you arrange it?
The rate is variable: Euribor plus a margin, and we arrange the loan from €1.5 million. It is secured on your securities portfolio, which stays invested and does not have to be sold. The bank lends against each security at only part of its value. If the portfolio falls too far, the bank calls for more collateral.
Lombard loan: what does a portfolio as collateral give you?
A Lombard loan gives you liquidity against your securities portfolio without selling it. The portfolio stays invested and the bank holds it as collateral.
- How much is possible? The bank lends against each security at only part of its value. The safer the security, the higher the loan-to-value. How large a credit line your portfolio gives is worked out by the bank from the individual lending values.
- What does it cost? The rate is variable: Euribor plus a margin set by the bank, charged on the amount drawn. We arrange Lombard loans from €1.5 million.
- What is the risk? If the portfolio falls in value, the bank calls for more collateral or sells securities. The rate can also rise.
How does a Lombard loan work?
You pledge your portfolio, the bank sets a credit line from the lending values, and you draw what you need. You pay interest only on the amount drawn. The loan usually runs as a bullet: you pay the interest as you go and repay at the end, from the portfolio or from another source. The portfolio remains yours and stays invested.
The process in four steps: From the portfolio to the payout there are four steps.
1. The bank reviews your portfolio: which securities count, and at what lending rate? 2. The credit line and the margin are set. 3. You sign the pledge agreement. The pledged securities can no longer be sold freely while the loan runs. 4. You draw the amount you need and pay the interest.
How is the lending value of each security set for a Lombard loan?
The bank sets a lending rate for each security. The ranges below are the ones banks and law firms publish in their guides; what counts is what your bank applies to your securities.
Cash and time deposits — Typical range: up to about 95%. Government and high-quality bonds — Typical range: about 80 to 95%. Large-cap single shares — Typical range: about 60 to 80%. Diversified equity funds and ETFs — Typical range: about 50 to 75%.
Guide values from public guides, not a commitment.
The size of the margin depends on the amount, the portfolio and the bank, and is clarified in the call. We arrange Lombard loans from €1.5 million. The rate is variable (Euribor plus a margin) and is usually below that of a fixed-rate loan.
The property serves as collateral with up to 50% of its valuation, from €1.5 million; together with the portfolio this forms the structure. The loan usually pays off when the rate is below the portfolio’s return.
How much does a Lombard loan cost?
The interest rate consists of the Euribor plus a bank margin. It is variable and is charged on the amount drawn. The size of the margin depends on the amount, the securities portfolio and the bank, and is settled in the consultation. We arrange Lombard loans from €1.5 million.
The loan usually pays off when the interest rate is below the return on the securities portfolio. Our sample calculation for a villa in Mallorca uses an interest rate of 3.15 %; this is an assumption, not an offer.
What risk does a Lombard loan carry?
The risk lies in the securities portfolio: if the value of the securities falls, the lending value falls too, and the interest rate is variable, so your interest burden rises if Euribor rises.
The risk lies in the securities portfolio. If the value of the securities falls, the lending value falls too. Banks usually work with two thresholds: at the first they ask for more collateral or a partial repayment, at the second they may sell securities, even at a poor price. On top of this comes the variable interest rate: if Euribor rises, your interest burden rises. And if the interest rate exceeds the return on the portfolio, the loan costs you wealth.
A buffer helps against this, and you should plan it in before you sign.
- Do not use the credit line to the full. The more distance from the limit, the more of a price fall the portfolio can withstand.
- Spread the portfolio widely. A single holding that crashes should not endanger the whole collateral.
- Allow for higher interest. The interest rate is variable, so the calculation should also hold up with a higher Euribor.
Lombard loan or securities loan: what is the difference?
As a rule there is none. Both terms mean a loan against a securities portfolio as collateral; securities loan is the more general expression, Lombard loan the traditional one. The Lombard facility is also the same thing. What matters is not the names but the lending rates, the interest margin and the conditions for margin calls and sale.
When does a Lombard loan suit a property purchase in Spain?
It suits you if you do not want to sell your securities portfolio and finance part of the purchase through it. The usual combination: a Spanish bank provides the mortgage on the property, and the Lombard loan covers the rest, including the purchase costs if needed. Our sample calculation for a villa in Mallorca with a Lombard loan of €2,141,500 shows what this looks like in figures. The same applies to a property in Germany: Lombard loan for a property in Germany. Whether the structure pays off for tax purposes is something to clarify with a local tax adviser.
What needs to be in place for a Lombard loan?
Four points decide whether a Lombard loan is an option for your purchase.
- From €1.5 million. This is the size the loan we arrange should have.
- A portfolio that the bank will lend against. It needs recognised securities and sufficient value.
- A mortgage or equity for the rest of the purchase. The Lombard loan supplements the financing; it does not replace it.
- A local tax adviser. The structure is not a standard product.
What is the Lombard loan to be distinguished from?
Three routes sound similar and are nevertheless something different.
- The mortgage on the property. The collateral is the property, not the securities portfolio. For a paid-off property in Spain this is called borrowing against the property.
- Borrowing against a property for a purchase in another European country. Here too the property is the collateral, and the loan starts at around €1.5 million: property as security for a loan.
- The private lender. It decides by property and exit and costs many times as much: private lender from €500,000.
Frequently asked questions
What is a Lombard loan?
A Lombard loan is a loan against a securities portfolio as collateral. You do not have to sell the securities, they stay invested. The bank sets a credit line from the lending values of the individual securities.
Interest rate on a Lombard loan: What does it depend on?
The interest rate consists of the Euribor and a mark-up applied by the bank. The mark-up depends on the amount, the securities account and the bank. As the interest rate is variable, your interest payments will increase if the Euribor rises.
From what amount do you arrange a Lombard loan?
From €1.5 million. Below that we do not arrange it.
What is the interest rate on a Lombard loan?
The rate is variable: Euribor plus a margin set by the bank, charged on the amount drawn. How high the margin is depends on the amount, the portfolio and the bank, and is clarified in the call.
What happens if the portfolio falls in value?
Then the lending value falls. The bank first asks for additional collateral or a partial repayment, and if the fall continues it may sell securities. That is why you should not draw the whole credit line.
Can I buy a property in Spain with a Lombard loan?
Yes, usually combined with a mortgage. The Spanish bank finances part of the price against the property, the Lombard loan covers the rest, and if needed the purchase costs. Whether a bank gives both is decided case by case.
Is this tax advice?
No. Whether the structure brings a tax advantage depends on residence, wealth and use of the funds, and belongs with a tax adviser on site before the purchase.
What is a securities backed loan or lending?
Securities-backed lending is another name for a Lombard loan: a loan against a securities portfolio as collateral. You do not have to sell the securities, they stay invested.
What are the disadvantages of a Lombard loan?
The disadvantage lies in the portfolio and in the rate. If the portfolio falls, the bank calls for collateral or sells securities. The rate is variable, and if it exceeds the return of the portfolio, the loan costs wealth.
Lombard loan or borrowing against the property: how does the interest comparison turn out?
With a Lombard loan the securities portfolio serves as collateral and the interest rate is variable, whereas with borrowing against a property the property serves as collateral, generally lent against up to 50 % of its valuation. Which route is cheaper depends on the portfolio, the amount and the property.
Lombard loan compared: how does it differ from borrowing against a property?
With a Lombard loan the securities portfolio serves as collateral, whereas with borrowing against a property it is the property, which is generally lent against up to 50 % of its valuation. The Lombard loan has a variable interest rate (Euribor plus margin). We arrange it from €1.5 million.
What is a Lombard loan, and for whom is it an option?
A Lombard loan gives you liquidity against your securities portfolio without your having to sell. It suits you if you do not want to sell your portfolio and want to use it to finance part of a property purchase in Spain. It is usually combined with the mortgage of a Spanish bank. We arrange it from €1.5 million. It is not venture debt for start-ups: the collateral is your portfolio, not the business plan of a young company. It can also serve as bridging for UHNW clients until a sale or the mortgage completes.
What happens if prices in the portfolio fall?
Then the lending value falls. The bank first asks for additional collateral or a partial repayment, and if there is a further fall it may sell securities. You should therefore not use the credit line to the full.
Lombard loan or securities loan: what is the difference?
As a rule there is none. Both terms mean a loan against a securities portfolio as collateral; securities loan is the more general expression, Lombard loan the traditional one. The Lombard facility is also the same thing.
Your portfolio, your purchase: we run the numbers with your figures
Send us the property, the price and the position of your portfolio. We tell you whether a Lombard loan holds before you apply anywhere. The tax question then belongs with your tax adviser on site.
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Content by Siegfried Perini — local brand representative since 2019, active in real estate since 1992, entered in the German intermediary register (§ 11a GewO) as a person directly involved in brokerage and advice. Point of contact for German-speaking buyers in Spain and Portugal. Brokerage by Olga Nikushkina, mortgage credit intermediary under § 34i German Trade Regulation (GewO); in Portugal through a locally licensed intermediary.