Lombard loan (pledge-backed loan)
A loan granted against the pledge of financial assets (life insurance, securities portfolio, PEA) held at the bank. It is frequently used by wealth-management clients to finance property without liquidating their investments, typically at a lower rate than a standard mortgage. The loan amount usually represents 50–80% of the pledged assets' value.
Key points
- Assets (life insurance, securities, PEA) remain invested throughout the loan term.
- Loan amount typically ranges from 50% to 80% of the pledged assets' value.
- The rate is usually lower than a standard mortgage rate.
- If assets fall below a threshold, the bank may issue a margin call.
Frequently asked questions
Why choose a Lombard loan instead of selling investments?
Selling assets often triggers immediate taxation (capital gains, social levies) and interrupts compounding. A Lombard loan preserves the portfolio's growth momentum while releasing liquidity for a property purchase. It is especially attractive when the portfolio's expected return exceeds the loan rate.
What is the main risk of a Lombard loan for the borrower?
If financial markets turn and pledged asset values fall below the agreed ratio, the bank may issue a margin call. The borrower must then provide additional assets or partially repay the loan within a very short timeframe. This risk should be carefully assessed for concentrated or volatile portfolios.
How does the broker incorporate a Lombard loan into a property financing plan?
The broker compares the total cost of the Lombard loan (rate, guarantees, pledge constraints) against a standard mortgage or a bullet loan. They also check the impact on the overall debt ratio and ensure the client maintains sufficient asset diversification. This product is generally reserved for clients with a significant financial portfolio.
In practice
An investor holds a life-insurance contract worth €400,000. Their bank grants a Lombard loan of €280,000 (70% of value) to finance a rental flat, leaving the investments untouched and continuing to grow.
Official sources
- Obtaining a mortgage loan · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr