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Straight Answers · Using your equity

Why doesn’t my equity count as borrowing power?

Bayley Clarke · Mortgage broker on the road · Lender policy checked 24 August 2026 · 7 min read

The 40 second version. Everything below is the detail underneath it.

Equity is the ceiling. Income is the floor.

Equity is the gap between what your place is worth and what you owe on it. It feels like money sitting in the house, and in one sense it is. But the bank can’t hand it to you. It can only lend it to you, secured against the house, and a loan is a loan: it has to be repaid, and the lender has to be satisfied you can repay it before a dollar moves.

So the first thing any lender does with an equity release is exactly what it does with a purchase. It looks at your income, your existing repayments, your living expenses and your other debts, adds the new loan on top, and asks whether the whole lot still services over 30 years at a buffered rate. If the answer is no, the equity is irrelevant. The house sets the ceiling on what you could borrow. Your income sets the floor on what you actually can.

That’s the bit from the video. Here’s the bit that doesn’t fit in 40 seconds: even when the income is there, the number the whole calculation starts from is a valuation, and lenders don’t agree on it. Then three more gates decide how much of the equity comes out, and they move a long way from one lender to the next.

Your equity depends on whose valuation you’re standing on

Before any lender applies a single rule, it decides what your place is worth. Every lender does that independently, with its own valuers and its own data, and the numbers land further apart than most people expect. Two real examples from the last year, details changed: the same home came back at roughly $819,000 from one lender and $750,000 from another, about 9% apart on the same bricks. On another file, one lender said $565,000 and another said $520,000, and that $45,000 gap was the whole difference between a $114,000 cash out working and not working.

There are three kinds of valuation. An automated or desktop valuation is instant and free, driven by a model and the sales data in your suburb, and it can run conservative or generous depending on how much data the model has to work with. A kerbside or walkthrough valuation puts a valuer at the property. A full internal valuation has them inside it. Which one a lender orders depends on the loan size and the LVR, and a higher LVR or a cash out pulls the lender toward a full valuation.

So before I pick a lender for an equity release, I order desktop valuations across several of them. It costs you nothing, it takes a day, and it tells us which lender is standing on the strongest defensible number before anything is lodged. That isn’t a trick, it’s ordinary broker work, and a valuer can still come in lower once they’re on site. But starting from the best number is the cheapest lever in the whole process.

Illustrative numbers, not a quote. That’s an $80,000 swing from the valuation alone, before a single lender policy is applied, and it’s often bigger than the swing between lenders’ cash out rules. Which is why the valuation is the first thing to shop, not the last.

The three gates after servicing

Every lender’s cash out policy is some version of these three questions. What changes is where each lender draws the line.

Gate one: how much without the paperwork

Lenders want to know what the money is for. Below a certain amount, most will take your word for it, recorded in the application. Above it, they want to see the thing you’re spending it on. Where that line sits is the single biggest difference between lenders on a cash out, and it has nothing to do with the rate.

Above the line, the evidence is the same nearly everywhere: builder quotes or invoices, a contract of sale, a letter from your accountant or financial planner, a statutory declaration, or evidence of the share trading account the money is going into. None of that is hard to produce. It just needs to exist before the application, not after the assessor asks.

Gate two: how high the loan can go

Equity release has its own LVR cap, and it’s often lower than the same lender’s cap for a straight purchase. Most of the panel sits at 90% with mortgage insurance. A group will go to 95% for acceptable purposes. One stops at 85%. And then there are the ones people get caught by.

Two lenders stop dead at 80%. Above that line they’ll refinance you, but no cash out, no equity release, no debt consolidation beyond a small allowance for costs. One of them is a lender plenty of people are already with. And one lender doesn’t accept equity release as a purpose at all, at any LVR. If you’re sitting with either kind and you want to use your equity, the first step is usually a refinance somewhere else, which brings its own costs into the maths.

Gate three: what changes above 80%

This is where the maths gets counterintuitive. Going above 80% should unlock more equity, because the ceiling is higher. At some lenders it does. At others, crossing 80% flips you into a different rulebook that caps the whole cash out, and you end up with less than you’d have had staying under the line.

Illustrative numbers, not a quote, and they assume the income services every one of those loans. But look at the third and fourth rows. Same house, same equity, and the lender’s above-80% rule hands you a third or less of what the 80% line would have. Several lenders cap cash out at around $100,000 in total once the loan is insured. Others cap it at 20% of the property value. Both are common, and both are the reason “how much equity have I got” and “how much can I get out” are different questions.

Above 80% the purpose rules tighten too. One major won’t release cash for structural renovations, business purposes or cryptocurrency. One bank will only do non-structural improvements up there. One won’t release equity above 80% for investment at all. And at one major, companies, trusts and foreign applicants can’t take cash out full stop. Evidence of purpose is required at nearly every lender past 80%, often for any amount, and mortgage insurance is payable on the lot.

What to bring, and what to ask

Your latest loan statement and a recent rates notice give me the two numbers that set the ceiling. Your payslips and a rough picture of your expenses give me the floor, and that’s the one that actually decides it. If you already know what the money is for, bring the quote, the contract or the planner’s letter, because at most lenders the paperwork is what moves you from the capped column to the uncapped one.

Then the question isn’t “how much equity have I got.” You can work that out on the back of an envelope. It’s “how much can I take out at 80%, how much more above it, and what does crossing that line cost me.” Those three numbers, at the lender you’re with and at two or three you aren’t, are the whole decision.

Lender policies described above were checked in August 2026 and change regularly. Individual lenders aren’t named here on purpose: policy moves, and the right lender depends entirely on your situation rather than on a list in an article.