Do Banks Deal with Equity Release? Here's What Actually Happens

When you hear the word equity release, you might think of specialist lenders, financial advisors, or retirement planning firms. But do banks even get involved? The short answer: not directly - and that’s by design.

Why Banks Don’t Offer Equity Release Products

Most big banks in Australia - like Commonwealth Bank, Westpac, NAB, and ANZ - don’t sell equity release schemes. That’s not because they’re avoiding the market. It’s because equity release doesn’t fit their core business model.

Banks make money by lending money and collecting interest over time. Their standard mortgage products are built around monthly repayments. You borrow $500,000, pay $2,500 a month, and the loan clears in 30 years. Simple. Predictable. Profitable.

Equity release flips that. You don’t make monthly payments. You borrow against your home’s value and let the debt grow over time. Interest compounds. The loan is only repaid when you die, move into care, or sell the home. That’s a risk profile banks avoid. It’s harder to model, harder to price, and harder to manage at scale.

Instead, equity release is handled by a small group of specialist providers. Companies like MoneyMe, Equity Release Australia, and Just Retirement focus solely on this niche. They’ve built systems to handle lifetime interest accumulation, regulatory compliance, and estate planning - things banks don’t want to touch.

What Banks Do Instead: Reverse Mortgages and Home Equity Loans

You might hear people say their bank offers “reverse mortgages” or “home equity loans.” That’s not equity release - at least not in the way most people mean it.

A reverse mortgage is technically a type of equity release. But in Australia, only a few lenders are licensed to offer them under the National Consumer Credit Protection Act. Banks don’t hold those licenses. Even if they did, the product structure is so different from their standard offerings that it’s not worth the administrative burden.

What banks do offer are home equity loans. These are different. With a home equity loan, you get a lump sum or line of credit based on your home’s value, but you must make regular repayments - just like a regular mortgage. You’re not deferring payments until later in life. You’re not letting interest roll up. You’re just borrowing against your equity, and you pay it back now.

If you’re 65, retired, and not earning a regular income, a home equity loan from a bank won’t work for you. They’ll ask for proof of income. They’ll check your serviceability. They’ll likely say no.

How Equity Release Actually Works (Without Banks)

Equity release comes in two main forms: lifetime mortgages and home reversion plans. In Australia, lifetime mortgages are the only common option.

With a lifetime mortgage:

• You borrow a portion of your home’s value - usually between 20% and 60%
• You don’t make monthly repayments
• Interest is added to the loan each month and compounds over time
• The loan, plus all accumulated interest, is repaid when you die or move into long-term care
• You keep full ownership of your home

The lender is a specialist provider, not a bank. They’re regulated by ASIC and must follow strict rules - including mandatory independent legal advice, no negative equity guarantees, and clear disclosure of how much you’ll owe over time.

For example, if you’re 70 and own a $700,000 home, you might release $300,000. At 5% annual interest, that debt could grow to $600,000 in 15 years. That’s not a surprise - it’s calculated upfront. You get a projection. You sign off on it. That’s the deal.

Why People Still Think Banks Are Involved

There’s a reason so many assume banks handle equity release. It’s because banks are everywhere. They’re in your local shopping centre. They advertise on TV. They’re the name you trust.

When you walk into a bank branch asking about “getting money from your house,” the advisor might say, “We don’t do that, but we can give you a home equity loan.” That sounds similar. It feels like the same thing. But it’s not.

Some banks even partner with equity release providers. You might see a bank’s logo on a brochure from a specialist lender. That doesn’t mean the bank is offering the product. It’s just a marketing partnership. The bank gets a referral fee. The specialist lender does all the work.

Don’t be fooled. If someone says, “Our bank offers equity release,” ask: “Who is the actual lender? Who holds the loan? Who calculates the interest?” If they can’t name a non-bank company, they’re misinformed.

What Happens to Your Home After You Pass Away?

One of the biggest concerns with equity release is what happens to your property after you die. Families often worry they’ll lose the home - or be stuck with a massive debt.

That’s why all legitimate equity release products in Australia include a no negative equity guarantee. This means your estate will never owe more than the home’s sale price. If the loan balance hits $500,000 but the house sells for $450,000, the lender eats the $50,000 loss. Your family walks away with nothing - but they don’t owe anything either.

This guarantee is legally required. It’s not a bonus feature. It’s built into every regulated equity release contract. Banks don’t offer this guarantee because they don’t offer the product. Specialist lenders do - and they’re the only ones you should work with.

Can You Use a Bank Loan to Fund Retirement Instead?

Some people try to avoid equity release by taking out a personal loan or using a credit card. That’s risky.

A $100,000 personal loan at 12% interest over 10 years means $1,400 a month in repayments. Most retirees can’t afford that. A credit card cash advance? Rates can hit 22%. That’s financial suicide.

Equity release isn’t perfect. But it’s designed for people who have wealth tied up in their home - but little in cash. It’s not a loan for people who want to buy a new car. It’s a tool for people who want to stay in their home, pay for care, or travel in retirement.

If you’re considering any alternative to equity release, compare the real costs. Don’t just look at the interest rate. Look at the monthly payment. Look at the term. Look at what happens if you can’t pay.

What to Do If You’re Thinking About Equity Release

If you’re over 60 and thinking about releasing equity from your home:

1. Don’t talk to your bank first. Talk to a specialist equity release advisor.
2. Get a free, no-obligation quote from at least two providers. Compare the interest rates, fees, and projected debt growth.
3. Get independent legal advice. This isn’t optional. It’s required by law.
4. Ask for a full illustration showing how your debt will grow over 10, 15, and 20 years.
5. Discuss the impact on your estate, Centrelink benefits, and aged care eligibility.

The right equity release plan can give you freedom. The wrong one can leave your family with nothing. Don’t let confusion with banks lead you to the wrong choice.

Final Thought: Equity Release Is a Niche, Not a Mistake

Banks don’t deal with equity release because it’s not their job. That doesn’t mean it’s a bad product. It means it’s a specialized tool - like a dental implant or a solar battery. You wouldn’t go to your GP for a root canal. Don’t go to your bank for equity release.

The right provider will explain everything clearly. They’ll show you the numbers. They’ll give you time to think. They’ll never pressure you.

If someone tells you a bank is the best place to get equity release, they’re wrong. And you deserve better than that.