Lombard loan: how do you finance a property in Spain with it?
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 €500,000. 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 €500,000. 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: portfolio as collateral, rate Euribor plus margin
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 rate. 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 €500,000.
- 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 high is the lending value?
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.
What does a Lombard loan cost? The rate is made up of Euribor and a margin set by the bank. It is variable and charged on the amount drawn.
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 €500,000. 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 €500,000; together with the portfolio this forms the structure. The loan usually pays off when the rate is below the portfolio’s return.
In our model calculation for a villa on Mallorca a rate of 3.15% is used; that is an assumption, not an offer.
What is the risk of a Lombard loan?
The risk sits in the portfolio: if the securities fall in value, the lending value falls with them, and the rate is variable, so your interest cost rises if Euribor rises.
The risk sits in the portfolio. If the securities fall in value, the lending value falls with them. 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 bad price. On top of that the rate is variable: if Euribor rises, your interest cost rises. And if the rate is higher than the return on the portfolio, the loan costs you wealth.
A buffer helps, and you plan it before you sign.
Do not draw the whole credit line. The more distance to the limit, the more loss the portfolio can absorb. Diversify the portfolio. A single holding that collapses should not endanger all of the collateral. Allow for higher rates. The rate is variable; the calculation should hold with a higher Euribor too.
When does a Lombard loan fit a property purchase in Spain? It fits when you do not want to sell your portfolio and want to finance part of the purchase against it.
The usual combination: a Spanish bank gives the mortgage on the property, the Lombard loan covers the rest, and if needed the purchase costs too.
What that looks like in figures is shown by our model calculation for a villa on Mallorca with a Lombard loan of €2,141,500. Whether the structure pays off for tax is something to clarify with a tax adviser on site.
What has to be in place?
Four points decide whether a Lombard loan is an option for your purchase.
- From €500,000. That is the size of loan we arrange. A portfolio the bank lends against. It needs recognised securities and sufficient value. A mortgage or equity for the rest of the purchase. The Lombard loan adds to the financing, it does not replace it. A tax adviser on site. The structure is not a standard product.
- What a Lombard loan is not: Three routes sound similar and are something else.
- The mortgage on the property. The collateral is the property, not the portfolio. On a paid-off property in Spain it is called capital release. Equity release for a purchase in another euro country. Here too the property is the collateral, and the loan starts at around €500,000: Spanish property equity release for another euro country. The private lender. It decides on the property and the exit, and costs a multiple: private mortgage lender from €500,000.
Securities-backed lending: how much does the bank lend against each security? The bank lends against each security at only part of its value, and the rate differs by type. Guide values from public guides: cash and time deposits up to about 95%, government and high-quality bonds about 80 to 95%, large-cap shares about 60 to 80%, diversified equity funds and ETFs about 50 to 75%. What counts is the rate your bank applies to your securities.
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.
From what amount do you arrange a Lombard loan?
From €500,000. 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.
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.
Related pages
Wealth tax Mallorca: how much does a buyer pay on a villa for €4,870,000?
Wealth tax Mallorca: model for a villa at €4,870,000 over 20 years — cash purchase, mortgage, mortgage with Lombard loan. Allowance €3m per person.
Spanish property equity release: can the money go to another euro country?
Spanish property equity release for non-residents: debt-free property in a euro country, as a rule up to 50 % of the valuation, from €500,000.
Remortgage in Spain (equity release): can you borrow against a property you own outright?
Remortgage in Spain as a non-resident: only two of 15–20 lenders will lend against an unencumbered property, as a rule up to 50 % of the valuation.
Private mortgage lender in Spain: when is it the right route?
Private mortgage lender in Spain: capital privado when no bank will write the case. Arranged from €500,000 — after testing the bank route, not instead of it.
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.