Who pays for the appraisal?

The borrower often pays the appraisal fee, though some lenders cover or waive it as part of a promotion. The cost is typically a few hundred dollars.

Is an appraisal the same as a home inspection?

No. An appraisal estimates market value for the lender, while a home inspection assesses the physical condition and potential repairs for the buyer's benefit.

What happens if the appraisal is lower than my offer?

The lender lends against the lower appraised value, so you may need to increase your down payment to cover the gap, renegotiate the price, or walk away if your offer allows it.

Mortgage Glossary

What is Appraisal?

An appraisal is a professional, independent estimate of a property's current market value, prepared by a qualified appraiser. In Canada, lenders order appraisals to confirm a home is worth enough to secure the mortgage they are advancing. The appraised value, not just the purchase price, helps determine how much a lender will lend.

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Quick answer

Also known as: property appraisal, home appraisal

Key points

An appraisal is an independent, professional estimate of market value.
Lenders use appraisals to confirm a property secures the mortgage adequately.
Loans are based on the lower of purchase price and appraised value.
A low appraisal can force a buyer to cover the shortfall in cash.
Appraisal fees are usually a few hundred dollars and may be paid by the borrower.

Appraisal explained

An appraisal is a formal valuation of a property carried out by a licensed or accredited appraiser who inspects the home and compares it to recent sales of similar properties nearby. The appraiser considers location, size, condition, upgrades, and market trends to arrive at an opinion of fair market value, documented in a written report.

Lenders rely on appraisals to manage risk: the mortgage is secured against the property, so the lender wants assurance the home is worth at least what it is lending. If an appraisal comes in below the agreed purchase price, the lender bases the loan on the lower value, which can leave the buyer needing to cover the shortfall in cash.

What a Appraisal is for

An appraisal exists to give the lender an objective, arms-length value for the collateral behind the mortgage. It protects the lender from over-lending on an overpriced property and provides the borrower with an independent check on what the home is really worth.

How it can help you

An appraisal helps Canadian borrowers avoid overpaying and ensures the loan amount is grounded in real value. If a deal is sound, the appraisal confirms it; if not, it flags a problem early. When comparing lenders through Lenderoo's free service across 40+ lenders, knowing the appraised value helps you understand your borrowing limits.

When it comes up

An appraisal commonly comes up in a hot market when a buyer wins a bidding war and pays well above asking. The lender orders an appraisal, and if it values the home below the winning bid, the buyer must make up the difference between the loan and the price out of pocket.

Example: an appraisal shortfall

You agree to buy a home for $600,000 with 20% down ($120,000), expecting a $480,000 mortgage. The lender orders an appraisal that comes in at $560,000.

The lender will only lend against the appraised value, so your loan is based on $560,000. To complete the purchase at $600,000 you now need to cover the $40,000 gap, on top of your original down payment, in cash.

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Questions & answers

Appraisal: frequently asked questions

Common questions Canadians ask about appraisal.

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Related mortgage terms

Loan-to-Value Ratio (LTV)

The ratio of the mortgage amount to the property's value, shown as a percentage.

Read definition

Home Inspection

Professional examination of a property's condition.

Read definition

Down Payment

The upfront cash payment made when purchasing a home

Read definition

Lender

A financial institution or company that provides the money for a mortgage.

Read definition

Equity

The difference between a home's market value and outstanding mortgage balance

Read definition

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary

Mortgage Glossary

What is Appraisal?

Find my best mortgage Back to glossary

Quick answer

Also known as: property appraisal, home appraisal

Key points

An appraisal is an independent, professional estimate of market value.
Lenders use appraisals to confirm a property secures the mortgage adequately.
Loans are based on the lower of purchase price and appraised value.
A low appraisal can force a buyer to cover the shortfall in cash.
Appraisal fees are usually a few hundred dollars and may be paid by the borrower.

Appraisal explained

What a Appraisal is for

How it can help you

When it comes up

Example: an appraisal shortfall

You agree to buy a home for $600,000 with 20% down ($120,000), expecting a $480,000 mortgage. The lender orders an appraisal that comes in at $560,000.

Have a question about appraisal?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

Appraisal: frequently asked questions

Common questions Canadians ask about appraisal.

Keep learning

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary