For international buyers purchasing high-value property in Spain, mortgage financing does not always have to follow the traditional model of borrowing part of the purchase price and contributing the remainder in cash.
For high-net-worth individuals with substantial investment portfolios, private banks can sometimes structure the financing using a combination of a Spanish mortgage and a Lombard loan secured against financial assets.
In the right circumstances, this can result in financing covering close to — and in some cases potentially 100% of — the property purchase price.
However, this should not be confused with a bank granting a 100% mortgage over the Spanish property itself.
What is a Lombard loan?
A Lombard loan is a loan secured by financial assets.
Instead of taking a mortgage over real estate, the bank receives security over assets such as:
- cash;
- listed shares;
- bonds;
- investment funds; or
- other eligible financial instruments.
The investment portfolio is normally held or transferred to an account with the lending bank or its private-banking institution and pledged as security for the loan.
The borrower remains the economic owner of the investments, subject to the terms of the pledge, and can therefore avoid selling a portfolio simply to generate cash for a property acquisition.
This is one reason Lombard lending is frequently used in international private banking and wealth management.
How can this be used when buying property in Spain?
Consider a purchaser acquiring a property in Marbella for €3 million.
Rather than paying €1 million in cash and financing €2 million through a conventional Spanish mortgage, a private-banking structure could theoretically look as follows:
Purchase price: €3 million
Spanish mortgage: €2 million
Lombard loan: €1 million
Total financing: €3 million
The Spanish mortgage is secured against the property.
The additional €1 million is not necessarily secured against the property at all. Instead, the private bank may grant the Lombard facility against, for example, a €2 million or €3 million investment portfolio belonging to the purchaser.
Economically, the purchaser has therefore financed the entire €3 million acquisition.
Legally, however, the bank — or banking group — has two completely different pools of collateral:
- the Spanish property; and
- the client’s financial portfolio.
This distinction is fundamental.
A 100% financed purchase is not the same as a 100% mortgage
Traditional mortgage lending is principally based on the value of the property, the borrower’s income and the bank’s credit assessment.
Banco de España data illustrates how unusual very high property-only leverage is in the broader Spanish mortgage market. Its Financial Stability Report reported an average loan-to-value ratio for new mortgages of approximately 68.7% in the first half of 2025, although individual transactions naturally vary considerably.
Lombard structures work differently because the lender has additional collateral.
A wealthy purchaser may therefore be able to finance considerably more of the acquisition without requiring the mortgage over the property itself to reach anything close to 100% loan-to-value.
In reality, the structure is less about providing financing to a purchaser who lacks capital and more about providing liquidity to a purchaser who already has significant wealth.
Why would a wealthy purchaser use a Lombard loan?
Imagine a client who has €5 million invested in a diversified portfolio and wishes to purchase a €3 million property in Spain.
The client could sell €1 million of investments to fund the part of the acquisition not covered by the Spanish mortgage.
But selling investments may be undesirable. It can interrupt a long-term investment strategy, crystallise gains or losses, create tax consequences, or simply reduce the client’s invested capital.
A Lombard loan offers another possibility: use part of the investment portfolio as collateral and borrow against it.
The portfolio can remain invested while providing liquidity for the real-estate transaction.
This type of financing is therefore primarily a wealth-management tool, rather than simply a mortgage product.
How much will a bank lend against an investment portfolio?
There is no universal percentage.
The bank assigns a lending value to the assets in the portfolio. This is often referred to in practice through concepts such as the collateral value, advance rate or haircut.
A highly liquid and relatively stable asset may receive a considerably higher lending value than a volatile or concentrated investment.
Cash and certain high-quality fixed-income instruments will generally provide stronger collateral than a concentrated position in a single listed company. Illiquid investments may have very little or no lending value at all.
Each bank applies its own credit policy, and the permitted borrowing level may change if the composition or value of the portfolio changes.
Consequently, a client with a €3 million portfolio does not automatically have €3 million of borrowing capacity.
The major risk: falling markets
This is the most important difference between a Lombard loan and an ordinary property mortgage.
If the value of a house falls temporarily, the mortgage lender would not normally require the borrower to deposit additional collateral simply because of that fall in market value.
With a Lombard facility, the collateral is continuously linked to the value of the underlying financial assets.
If the portfolio falls substantially in value, the agreed collateral ratio may no longer be satisfied.
The bank may then be entitled, depending on the financing documentation, to require the borrower to:
- deposit additional financial assets;
- provide cash;
- reduce the outstanding loan; or
- restore the agreed collateral ratio in another way.
If the position is not corrected, the bank may ultimately have rights to realise the pledged assets.
This is the private-banking equivalent of a margin call, and it is one of the principal risks that a borrower should understand before entering into a Lombard structure.
The European legal framework
The legal basis for financial collateral arrangements within the European Union originates principally from Directive 2002/47/EC on financial collateral arrangements.
The Directive created a European framework for certain arrangements involving financial collateral, including cash and financial instruments, and was designed to make the creation and enforcement of qualifying financial security more legally predictable across the EU.
Spain implemented this framework through Royal Decree-Law 5/2005 of 11 March, particularly Chapter II.
Article 6 expressly recognises financial collateral through, among other mechanisms, a pledge (pignoración), while Article 7 identifies cash, transferable securities and other financial instruments as eligible collateral.
The legislation also expressly contemplates additional collateral where the value of the pledged assets changes. Article 10 permits the parties to agree that additional securities or cash must be provided to restore the agreed relationship between the secured obligation and the collateral.
For qualifying arrangements, the legislation also provides particularly effective enforcement mechanisms. Article 11 permits financial instruments to be sold or, where the statutory and contractual requirements are satisfied, appropriated following an enforcement event.
An important limitation for individual borrowers
There is an important legal nuance.
The special Spanish regime contained in Royal Decree-Law 5/2005 does not generally apply to financial collateral arrangements where one of the contractual parties is a natural person, subject to a limited statutory exception. This is expressly stated in Article 4.4.
This matters because many purchasers of luxury residential property are private individuals rather than companies.
The precise governing law and collateral structure must therefore be examined in each transaction rather than assuming that every private-banking pledge falls under the Spanish special financial-collateral regime.
Why Luxembourg frequently appears in these structures
Many European private banks conduct international wealth-management and Lombard lending activities through Luxembourg.
Luxembourg has its own Law of 5 August 2005 on Financial Collateral Arrangements, implementing the European Financial Collateral Directive. The current consolidated law is published by Luxembourg’s financial regulator, the CSSF, and Luxembourg’s official legal database, Legilux.
Consequently, a transaction involving a Spanish property can have two distinct legal elements:
Spanish mortgage: governed by Spanish law and secured against Spanish real estate.
Lombard facility: potentially entered into with a private bank in another jurisdiction and secured against a financial portfolio held there.
Where book-entry securities are involved, determining where the relevant securities account is maintained can also be important when analysing which country’s law governs the financial collateral. Spanish Royal Decree-Law 5/2005 itself follows this principle for arrangements falling within its scope.
This cross-border structure is one reason legal review of the financing should cover more than simply the Spanish mortgage deed.
What about Spanish mortgage law?
Where the Spanish financing falls within its scope, Law 5/2019 regulating Real Estate Credit Agreements provides the principal modern Spanish framework governing mortgage lending to individuals.
The law expressly protects natural persons who are borrowers, guarantors or security providers in qualifying loans secured over residential property or loans whose purpose is to acquire or retain rights in land or real estate.
The Spanish mortgage and the Lombard facility should nevertheless be analysed as separate contractual and security arrangements, even where both are provided within the same international banking group.
Is Lombard financing suitable for everyone?
No.
Lombard lending is normally relevant for purchasers with significant liquid or investable assets.
The client should understand not only the interest rate but also:
- which investments are eligible as collateral;
- the lending value assigned to each asset;
- what happens if markets fall;
- the circumstances in which additional collateral can be demanded;
- whether the bank can liquidate investments;
- whether investments may be transferred or substituted;
- the governing law of the pledge;
- currency risk where the loan and investments are denominated differently; and
- the relationship between the Lombard facility and the Spanish mortgage.
The structure can be extremely useful, but it introduces investment and collateral risk that does not normally exist in the same form with a conventional mortgage.
Conclusion
For wealthy international buyers, the statement that a bank can finance “100% of a Spanish property purchase” may indeed be correct — but the expression can be misleading.
It will often not mean that the bank is prepared to lend 100% against the property.
Instead, sophisticated private-banking structures can combine conventional mortgage lending against the Spanish property with a separate Lombard facility secured against the purchaser’s financial assets.
For the right client, this can provide substantial liquidity without requiring the sale of investments and can be an efficient way of structuring the acquisition of high-value Spanish real estate.
But the two facilities involve different security, different risks and potentially different jurisdictions. The financing documentation should therefore be reviewed as a whole before the purchaser commits to the transaction.
Franke & de la Fuente advises international clients on the legal aspects of acquiring and financing real estate in Spain. The availability and terms of any mortgage or Lombard facility are determined by the relevant financial institution and depend on the borrower’s individual financial circumstances.
