When Is An Appraisal Required?

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You have your mortgage commitment in hand from your lender, you’re reviewing the conditions and you see a condition for an appraisal. What does this mean? When and why is an appraisal required? Who pays for your appraisal?

If your down payment is less than 20% or if the mortgage is insured then an appraisal is generally not required. That’s because insurers can simply input your property address into their software and determine if the purchase price is inline with recent sales data (Checkout CMHC’s Emili). If there are any discrepancies then an appraisal will be required.

If your mortgage is not insured, lenders generally require appraisals to confirm the purchase price. This cost is usually passed on to the borrower with the exception of when the mortgage is for a switch from one lender to another. There are some lenders in the market who insure their entire mortgage portfolio irrespective of how much down payment you bring to the table. These lenders almost never require an appraisal.

Of course, there are always exceptions to the rule and an appraisal is required if the:

  • mortgage is to finance a private purchase and sale
  • property is a rural property
  • property is a rental property
  • mortgage is to fund a new construction, in order to confirm that it is at least 97% complete


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Christopher is a second-generation mortgage broker. Following in his dad’s steps, he helps borrowers demystify mortgage financing. Christopher lives in Toronto and when he is not in the office you’ll find him sailing on Lake Ontario.
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