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Why Lombard lending might be the answer to your funding needs

Much has been written about the difficulties in obtaining funding and how certain individuals might choose to buy property with cash. While both of these statements are true to an extent, it is worth looking at what arrangements can be made to finance your property purchase in the most efficient way.

Lombard lending is one option worth considering, enabling you to raise capital against your existing assets. For example, anyone with a reasonably well-diversified portfolio of equities can borrow up to 70 per cent of its value (or up to 80 per cent if your assets are comprised of gilts and/or cash) to buy property.

SPF Private Clients has access to a number of private banks, which will agree such arrangements at very competitive rates – because you are leveraging your own assets. Clients can expect to pay between 0.5 and 0.8 per cent over the cost of funds to the bank for managing this arrangement.
With one and three-month Libor (London Interbank Offered Rate) hovering just under 0.5 per cent, that makes for an extremely competitive borrowing rate of between 1 and 1.3 per cent.

It is a cheap way of funding a property purchase because it is low risk for the bank as the client is using his own securities as collateral. So if the borrower defaults, the bank will simply sell his shares or fixed income securities. Fees are also kept to a minimum, as there is no valuation report required or legal fees.

Lombard lending offers another advantage for overseas borrowers. For example if your portfolio is located in the US, you may be able to borrow against it without your funds leaving the US or breaking up your existing investments. This will keep costs down further and is particularly useful if you plan to return to your country of origin at some point.

For more information, please contact Mark Hampton at SPF Private Clients on 020 7330 8525

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