How much is possible?
The bank lends against each security at only part of its value. The safer the security, the higher the rate. The bank works out the credit line your portfolio gives from the individual lending values.
Structure · Lombard loan
Lombard loan from €1.5 million: what it is and when raising capital through securities backed lending complements a property financing
With a Lombard 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, for property in selected European countries. Here is the Lombard loan explained: how it works, what it costs and what happens when prices fall.
What is a Lombard loan, and from what amount do you arrange it?
A Lombard loan is a loan secured on your securities portfolio; the portfolio stays invested and does not have to be sold. The rate is variable, Euribor plus a margin, and we arrange it from €1.5 million. The bank lends against each security at only part of its value. If the portfolio falls too far, the bank calls for more collateral or sells securities.
Lombard loan explained: how does your portfolio work as collateral?
A Lombard loan gives you liquidity against your securities portfolio without having to sell. The portfolio stays invested, the bank holds it as collateral.
What does it cost?
The rate is variable: Euribor plus a margin set by the bank, charged on the amount drawn. We arrange the Lombard loan from €1.5 million.
What is the risk?
If the portfolio falls, the bank calls for more collateral or sells securities. The rate can rise too.
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 is usually repaid at maturity: you pay the interest as you go and repay at the end, with money from the portfolio or from another source. The portfolio still belongs to you and stays invested.
The process in four steps
From portfolio to payout there are four steps.
- The bank checks your portfolio: which securities count, and at what lending value?
- Credit line and margin are set.
- You sign the pledge agreement. You can no longer sell the pledged securities freely while the loan runs.
- You draw the amount you need and pay the interest.
How high is the lending value?
The bank sets its own lending value for each security. The ranges below are published by banks and law firms in their guides; what counts is what your bank applies to your securities.
| Type of security | Typical range |
|---|---|
| Cash and fixed deposits | up to about 95 % |
| Government and good corporate bonds | about 80 to 95 % |
| Large single shares | about 60 to 80 % |
| Broadly diversified equity funds and ETFs | about 50 to 75 % |
Guide values from public guides, not a commitment.
Lombard loan interest rate: what does it cost?
The rate consists 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 €1.5 million.
The loan usually pays off when the rate is below the return of the portfolio. If it is above, the loan costs wealth. We do not quote a fixed rate, an offer follows after we check your portfolio.
What is the risk of a Lombard loan?
The risk lies in the portfolio: if the securities fall in value, so does the lending value, and the rate is variable, so your interest cost rises when Euribor rises.
The risk lies in the portfolio. If the securities fall, so does the lending value. 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 comes the variable rate: if Euribor rises, your interest cost rises. And if the rate exceeds the return of the portfolio, the loan costs wealth.
A buffer helps, which you plan before you sign.
- Do not draw the whole credit line. The more distance to the limit, the more price fall the portfolio can take.
- Diversify the portfolio. A single holding that collapses should not endanger the whole collateral.
- Allow for higher rates. The rate is variable, the calculation should also work with a higher Euribor.
Lombard loan or securities backed loan: what is the difference?
As a rule there is none. Both terms mean a loan against a securities portfolio as collateral; securities backed lending is the more general expression, Lombard loan the traditional one. What counts are not the names but lending values, margin and the terms for margin calls and sale.
When does a Lombard loan complement a property financing?
It fits if you do not want to sell your portfolio and want to finance part of the purchase with it. The usual combination: a bank gives the mortgage against the property, the Lombard loan covers the rest, and if needed the purchase costs. This works for property in selected European countries. For Spain the details are on our Lombard loan page for a property in Spain. Whether the structure pays off for tax is something to clarify with a tax adviser.
What has to be in place?
Four points decide whether a Lombard loan is possible for your purchase.
- From €1.5 million. That is the size of loan we arrange.
- A portfolio the bank lends against. It needs recognised securities and sufficient value.
- A mortgage or own funds for the rest of the purchase. The Lombard loan complements the financing, it does not replace it.
- A tax adviser. The structure is not a standard product.
What is a Lombard loan to be distinguished from?
Three routes sound similar and yet are something different.
- The mortgage on the property. The collateral is the property, not the securities account. For a property with no mortgage left, this is called borrowing against property.
- Capital without a specified purpose. Here too the property is the collateral, not the securities account: raising capital without a specified purpose.
- Borrowing against property in Spain. The collateral is a debt-free house in Spain: borrowing against a house in Spain (DE).
Frequently asked questions about the Lombard loan
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.
Lombard loan explained: what does it mean that the portfolio is the collateral?
The portfolio still belongs to you and stays invested, the bank holds it as collateral. You can no longer sell the pledged securities freely while the loan runs. If the portfolio falls in value, the bank calls for more collateral or sells securities.
Lombard loan interest rate: what does it depend on?
The rate consists of Euribor and a margin set by the bank. The margin depends on the amount, the portfolio and the bank and is clarified in the call. Because the rate is variable, your interest cost rises when Euribor rises.
How high are the interest rates on Lombard loans?
The interest rate is variable: Euribor plus a mark-up applied by the bank, calculated on the amount withdrawn. We do not quote a fixed rate, as the mark-up depends on the amount, the account and the bank.
From what amount do you arrange a Lombard loan?
From €1.5 million. Below that we do not arrange it. This applies in all selected European countries.
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.
What is a securities backed loan, and what is securities backed 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.
Can I buy a property with a Lombard loan?
Yes, usually combined with a mortgage. The 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.
Lombard loan or mortgage: what is the difference?
With a Lombard loan the securities portfolio is the collateral, with a mortgage it is the property. The Lombard loan has a variable rate (Euribor plus margin). Which way is cheaper depends on the portfolio, the amount and the property.
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.
Is a Lombard loan available for a property in Spain?
Yes, we arrange it from €1.5 million for Spain as well, usually together with the mortgage of a Spanish bank. The details are on our Lombard loan page for Spain.
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 before the purchase.
What is the lending value of shares and ETFs?
The bank sets this itself for each security. Publicly quoted ranges are around 60 to 80 % for large individual shares and around 50 to 75 % for broadly diversified equity funds and ETFs. These are guide values, not a commitment.
Your portfolio, your property: we run the numbers with your figures
Send us the property, the price and where your portfolio is held. We tell you whether a Lombard loan carries before you file an application anywhere. The tax question then belongs with your tax adviser.
Related pages
Equity release (Kapitalbeschaffung)
Equity release on property: how do I raise capital without a tied purpose?
When the securities portfolio is not the right route: capital against the property, without a tied purpose.
Equity release (Kapitalbeschaffung)
Borrowing against an unencumbered property: may the capital go to another European country?
The property instead of the portfolio as collateral.
Spain
Borrowing against a debt-free house in Spain: is it possible without selling? (German page)
Borrowing against a paid-off property in Spain up to 50 % of the Tasación (Spanish bank valuation).
Spain
Financing property abroad: can I borrow against my house to buy in Spain?
Financing the purchase price in Spain with a German property as security.
Editorially responsible: Olga Nikushkina — owner, §34i GewO (German mortgage brokerage), adviser register D-W-132-ZUCB-95. Specialised in German property financing with an international dimension: non-residents, foreign-currency income, cross-border workers, expats. Siegfried Perini is entered in the German intermediary register under this licence as a person directly involved in brokerage and advice (§ 11a GewO), active in real estate since 1992. Not legal or tax advice.
