What is a Lombard loan?

A Lombard loan (in Italian: prestito Lombard or finanziamento su pegno di portafoglio) is a credit facility secured against an investment portfolio rather than real estate. The bank accepts your portfolio — bonds, equities, funds, structured products — as collateral and extends a credit line up to a percentage of its market value. That credit line can be used for any purpose, including property purchase.

The mechanics are straightforward: you pledge the portfolio to the bank, the bank advances funds against it, and you repay the loan while continuing to hold — and benefit from the returns of — your investments. You do not liquidate. The portfolio works as collateral, not as payment.

This product sits within private banking — but it is not exclusive to standalone private institutions. It is offered by the private banking arms of larger Italian and international banks, some of which also operate retail banking divisions that handle conventional mortgages. This matters: Christina's advisory network includes banks of this type, and access to Lombard-style financing can be introduced and coordinated as part of the broader financing discussion alongside the mortgage. It requires a custodied portfolio — typically held with the lending institution, or transferred there as a condition of the loan.

Typical terms

  • Advance rate: typically 50–70% of the portfolio's market value, depending on asset class and concentration. High-quality government bonds and investment-grade fixed income attract higher advance rates; equities and alternative assets attract lower rates.
  • Minimum portfolio size: generally €500,000–€1,000,000, depending on the bank. Below this threshold, the operational complexity of the pledge structure is not worth it for the institution.
  • Interest rate: variable, typically EURIBOR + spread. The spread reflects your profile and the portfolio composition, not a long-term fixed rate. This is different from a traditional Italian mortgage, which can be fixed for 10–30 years.
  • Margin calls: if the portfolio value falls below the maintenance threshold (typically around 120–130% of the loan amount), the bank may require you to top up the collateral, reduce the loan, or sell portfolio assets to restore the ratio. This is the key risk of the structure.
  • Portfolio custody: the portfolio must be held at — or transferred to — the lending institution. This is a meaningful constraint if your assets are currently custodied elsewhere.

Three scenarios for Italian property buyers

Scenario 1 — Lombard loan as the standalone financing

You have a portfolio of €2,000,000 and are buying a property for €900,000 as a non-resident. A traditional mortgage would cover at most 60% LTV — €540,000 — leaving €360,000 as the minimum cash requirement at closing. Alternatively, a Lombard facility at 60% of your portfolio advances €1,200,000, comfortably covering the full purchase price without touching your portfolio's capital or needing a retail mortgage at all.

This can be the right structure when: the property is a holiday home or investment (where mortgage interest deductibility is limited anyway); you prefer variable-rate short-term financing you plan to repay from portfolio distributions; or you simply want to avoid the 60-day retail mortgage process and close quickly.

Scenario 2 — Lombard facility combined with a traditional mortgage

The most capital-efficient structure for many HNWI buyers is combining a traditional mortgage with a Lombard facility — ideally from the same bank. The mortgage covers the maximum comfortable LTV: 80% for a resident, 60% for a non-resident, sized to generate monthly installments your income services comfortably. The Lombard covers only the remaining gap between the mortgage amount and the purchase price. Because you are drawing only a fraction of your available Lombard capacity, the margin call risk stays contained — a partial draw is far less likely to breach the maintenance threshold than a fully-extended facility.

The duration argument matters here. A mortgage is a long-term instrument — 15 to 25 years — which is the appropriate match for a long-term asset like real estate. A Lombard loan is fundamentally short-term and variable-rate: structuring the full purchase through Lombard alone creates a duration mismatch, financing a 20-year asset with an instrument that can be repriced or recalled at any time. Keeping the mortgage as the primary instrument and the Lombard as a targeted gap-filler preserves the right duration match where it counts.

Keeping Lombard headroom free is a deliberate advantage. Once the transaction closes, the Lombard — only partially drawn — retains significant available capacity. That headroom can be deployed for investment leverage within the portfolio itself, or to finance purchases that do not benefit from mortgage-style long-term financing: a boat, a car, a renovation, other tangible assets. These are precisely the categories where a portfolio-secured credit line is the natural tool. Using it to cover only the downpayment gap on the property — rather than the full amount — keeps that flexibility intact.

Working with a single bank for both instruments is the cleanest execution path. One institution manages the portfolio pledge, advances the Lombard tranche, and issues the mortgage. The documentation, the collateral structure, and the combined financing presentation become a single coherent transaction — rather than two parallel applications at two separate institutions that may not communicate with each other.

Scenario 3 — Lombard facility as a bridge

You are moving quickly on a property — a proposta d'acquisto has been accepted, the compromesso is imminent, and you need proof of funds or a faster path to closing than a standard 60–90 day retail mortgage process. A Lombard facility, already in place with your private bank, can be drawn down immediately, allowing you to close on time. The retail mortgage is arranged in parallel and refinances the Lombard position once it completes.

This bridge use is particularly useful when a seller will not accept a condizione sospensiva mutuo (mortgage contingency clause) — increasingly common in competitive markets like Milan's central zones.

How it fits into the financing presentation

A key part of what the advisory process handles is identifying the right institutions. Not every Italian bank offers both a private banking arm capable of structuring a Lombard facility and a retail mortgage division experienced with HNWI expat buyers — and not every private bank comfortable with Lombard financing is set up to handle the combined transaction cleanly. Christina's advisory network includes banks of this type, and introducing clients to the right institution is part of the engagement.

For cases where the Lombard and the mortgage are arranged with the same bank, the mortgage structuring and presentation are handled in full. For cases involving two separate institutions, the role extends to coordinating the overall financing picture: ensuring that both underwriting teams have a consistent view of the transaction, that the DTI and combined LTV ratios are correctly framed in the mortgage application, and that the Lombard facility is presented in a way retail underwriters can evaluate — not as a red flag, but as a deliberate structural element.

The key point: whether the Lombard and the mortgage come from the same bank or separate institutions, the financing presentation needs to be coherent from the start. Getting there is what the advisory process is for.

Who is this relevant for?

The Lombard + mortgage structure is most relevant for buyers who combine several of the following:

  • A substantial custodied portfolio (€500,000 minimum; more typically €1,000,000+)
  • A property purchase above €800,000 — €1,000,000, where the gap between available mortgage financing and the purchase price is material
  • An income profile that is primarily investment-derived (dividends, distributions, capital events) rather than salary — which traditional Italian mortgage underwriting handles less cleanly
  • A preference to avoid liquidating a well-structured portfolio to fund a property purchase
  • Investor Visa holders (who have already made a qualifying capital commitment to an Italian investment, and whose private banking relationships are therefore already established)
  • Flat Tax regime residents with substantial foreign-source income and liquid assets they want to preserve

The key risk: margin calls

The structural risk of a Lombard loan is different from a traditional mortgage. With a mortgage, your obligation is fixed monthly payments — as long as you make them, the bank cannot change the terms mid-contract. With a Lombard loan, the bank can issue a margin call if the portfolio value falls below the maintenance threshold. In a significant equity market downturn — 2008, 2020 — portfolios can breach these thresholds quickly.

How to mitigate: use a conservatively positioned portfolio (fixed income, investment-grade bonds, low-volatility assets) as the Lombard collateral, rather than concentrated equity positions. A 60% advance rate on a diversified bond portfolio requires a 40% drop before a margin call is triggered — unlikely, but not impossible. Stress-testing the structure before committing is the right practice.

For many HNWI buyers, the right answer is to use the Lombard for a portion of the financing — the equity gap portion — while keeping the long-term, fixed-rate retail mortgage as the primary instrument. This limits the Lombard exposure and therefore the margin call risk.

Common questions

Yes. If the Lombard facility is drawn down before or during the mortgage application, it represents existing debt that Italian underwriters will factor into the debt-to-income (DTI) ratio. This is exactly why the financing presentation needs to be structured carefully. The bank needs to understand the full picture: that the Lombard is portfolio-secured (not income-serviced in the same way as a consumer loan), and that the combined structure is intentional and coherent. A well-prepared application explains this; a poorly prepared one leaves the underwriter to draw their own conclusions.

Technically possible, but it requires careful structuring. Italian retail banks typically verify that the down payment comes from equity (your own funds), not from borrowed money. If the Lombard facility is used to fund the down payment, the retail bank will see that the buyer has no unencumbered equity contribution — which can lead to a declined application or a required increase in the Lombard-funded tranche. The most common structure is to use the Lombard for the portion of the purchase price above what the retail mortgage covers, rather than as the source of the down payment itself. This distinction matters and needs to be reflected in how the transaction is presented.

This is a private banking product — not a retail banking product — offered by the private banking arms of larger Italian and international banks that also have retail divisions. Standalone retail banks do not offer it. Part of what the advisory process covers is identifying the right institution: one that has both the private banking capability to structure the Lombard and the retail mortgage experience to handle the HNWI expat profile. Where a single bank can handle both instruments, that is the cleanest path. Where two institutions are involved, the advisory process coordinates both sides. This is not a product you can compare on a public marketplace; the right bank depends on your portfolio size, residency status, property price bracket, and transaction structure.

Lombard loans themselves are available to both residents and non-residents — the collateral is the portfolio, not your tax status. However, for the combined Lombard + mortgage structure, the retail mortgage component is subject to the standard non-resident LTV cap of 60%. This means a non-resident buyer using this structure might use the mortgage for 60% of the purchase price and the Lombard for anything above that — rather than a resident buyer who could reach 80% on the mortgage alone. In some cases, the Lombard facility makes the most sense precisely because it bypasses the non-resident LTV restriction.

The Flat Tax regime covers foreign-source income — dividends, capital gains, foreign rents — under a fixed €200,000 annual substitute tax, regardless of amount. Interest paid on a Lombard loan drawn to buy Italian property is a cost incurred in Italy, which is a separate matter from the foreign income the Flat Tax covers. The interaction is relatively contained: the Lombard cost is a deductible expense in Italy if the property generates Italian rental income, but the Flat Tax itself is not affected by the loan structure. What the Flat Tax does change is the overall financial picture of the purchase: with €200,000 capping the Italian tax on all foreign income, the net cost of financing — whether through a mortgage, a Lombard, or both — is materially lower than it would be under standard Italian marginal rates. Full mechanics: The €200k Annual Flat Tax for Italy Residents.

Is this structure right for your profile?

Whether a Lombard loan makes sense — standalone, combined, or as a bridge — depends on portfolio composition, the property price bracket, residency status, and how quickly you need to close. A 30-minute call is the right place to map out the options and work out which structure fits your situation.

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