LOMBARD LOAN

A Lombard loan is a credit facility secured against a portfolio of assets – shares, bonds, investment funds, cash or other financial assets – without the need to liquidate them. It is the most efficient way to release liquidity from a portfolio without divesting. In Spain, Lombard loans typically provide financing of between 50% and 90% of the value of the pledged portfolio.

The aim is not simply to access liquidity, but to avoid the opportunity cost of divesting at an unfavourable time. The borrower retains ownership, investment returns and market exposure to their assets while obtaining finance.

It is a private agreement which, under certain structures – especially in international private banking – may not be treated as traditional debt in local credit assessments and does not appear on standard credit reports. This makes it a particularly powerful tool in three scenarios: increasing leverage to finance 100% of a property by combining a mortgage with a Lombard loan, optimising the wealth tax burden on high-value properties, and obtaining finance for highly leveraged clients without reducing their liquidity.

The interest rate is usually linked to 12-month Euribor plus a margin of between 0.7% and 1%.

Altavista Finance structures Lombard loans through private banks in Spain and Luxembourg.

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LOMBARD LOAN FEATURES

ELIGIBLE ASSETS

Listed shares, bonds, ETFs, investment funds, cash, transferable pension funds and, in some cases, alternative assets such as private equity holdings or discretionary portfolios.

VALUATION AND LTV

PORTFOLIO PROFILE INDICATIVE LTV
Fixed income Up to 83%
Yield / conservative Up to 73–79%
Balanced Up to 66%
Equities Up to 50%

PORTFOLIO FLEXIBILITY

In structures arranged through Luxembourg, the pledged portfolio is fully flexible: the client may adjust or reallocate their investments at any time, without any notarial or administrative process.

REPAYMENTS

Interest-only payments apply – no capital repayments are made during the term of the loan. The principal is repaid at maturity or on renewal.

MARGIN CALLS

If the value of the portfolio falls below an agreed threshold, the lender may request additional collateral or a partial repayment of the loan. This is a risk that the client must understand and manage.

STRUCTURE

It can be structured as a revolving credit facility (with partial drawdowns) or as a term loan. The typical term is one to five years, with the option to renew.

THREE WAYS TO USE A LOMBARD LOAN

01

Replace a mortgage

When a buyer cannot access traditional mortgage finance – because of their profile, income structure, property type or transaction timeline – a Lombard loan provides an alternative. Instead of securing the finance against the property, the purchase is financed against the investment portfolio.

02

Supplement a mortgage – finance 100%

A Lombard loan can work alongside a traditional mortgage to finance up to 100% of the property value. The mortgage covers 60–75%, while a Lombard loan covers the remainder against the asset portfolio. The buyer acquires the property without having to provide a cash deposit.

03

Finance staged payments for a property development

A Lombard loan can fund the staged payments for a property development (an off-plan new build) without requiring cash for each instalment.

TAX ADVANTAGE: WEALTH TAX

In Spain, wealth tax applies to the taxpayer’s net assets. A Lombard loan creates a liability that reduces net taxable wealth: the pledged portfolio remains an asset, but the associated loan is a debt deducted from total wealth.

STRUCTURING IN SPAIN
OR LUXEMBOURG

AVF can structure Lombard loans domiciled in Spain or Luxembourg. Both options are legitimate and have different implications:

SPAIN LUXEMBOURG
Lenders Spanish private banks Luxembourg private banks
Eligible assets Portfolio held in custody in Spain or transferable Portfolio held in custody in Luxembourg
Impact on credit assessment May count as debt in local credit assessments May not count as traditional debt – private contract
Portfolio flexibility Fixed portfolio: any change requires notarial formalities Flexible portfolio: it can be changed without restrictions
When it is preferable Clients with assets already in Spain Clients with assets in Luxembourg seeking flexibility

LOMBARD LOAN VS. TRADITIONAL MORTGAGE

LOMBARD LOAN TRADITIONAL MORTGAGE
Security Asset portfolio Property
Contract type Private contract Registered public deed
LTV 50%–90% of the portfolio value 60%–75% of the valuation
Term 1–5 years (renewable) 20–30 years
Repayment Interest only Capital and interest
Speed Weeks 8–12 weeks
Use of funds Flexible Property purchase only
Tax impact Reduces the wealth tax base Does not reduce taxable wealth
Risk Margin calls if the portfolio falls in value No margin calls
Can be combined Yes, it can supplement a mortgage to finance up to 100% Yes, it can be combined with a Lombard loan

WHO A LOMBARD LOAN IS FOR

A Lombard loan is designed for investors and high-net-worth clients who need liquidity without selling their investments. It is not a mass-market product, as it requires a substantial investment portfolio. In practice, arrangements in Spain typically require portfolios from €300,000 to over €1 million, while arrangements in Luxembourg usually start at €500,000.

REAL-WORLD LOMBARD LOAN TRANSACTION

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FREQUENTLY ASKED QUESTIONS ABOUT LOMBARD LOANS

Which assets can I use as collateral?
Listed shares, bonds, ETFs, investment funds and portable pension funds. Some private banks also accept alternative assets, such as private equity holdings or discretionary portfolios.
Typically between 50% and 90% of the value of the pledged portfolio.
Yes. This is one of its most common uses. A Lombard loan can finance the entire purchase or supplement a mortgage.
Si la cartera cae por debajo del umbral de cobertura acordado, la entidad puede solicitar garantías adicionales (margin call) o la devolución parcial del préstamo.
The loan creates a liability that reduces the taxpayer’s net wealth for wealth tax purposes.
There are three main differences. First, in Spain, the loan may count as debt in a local credit assessment; in Luxembourg, it may not count as traditional debt. Second, in Spain, the pledged portfolio is fixed and any change requires a notary; in Luxembourg, its composition can be changed freely. Third, the jurisdiction determines which lenders are available and the applicable regulatory framework. AVF structures Lombard loans in both jurisdictions.

A Lombard loan provides access to financing secured against an investment portfolio without liquidating its assets. In Spain, these loans typically provide between 50% and 90% of the portfolio’s value. It is a private contract that, under certain international private banking structures, may not count as traditional debt. The resulting liability reduces the taxable base for wealth tax purposes. Altavista Finance, authorised by the Bank of Spain under licence E192, structures Lombard loans through private banks in Spain and Luxembourg.

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If you are considering a real estate transaction in Spain and want to understand which options make sense to explore, we would be happy to talk.

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