Think You Always Need a Home Appraisal? Sometimes.

Understanding When Appraisals Are Required Across Canada

When buying or refinancing a home, many clients are surprised to learn that a full appraisal isn’t always required. In some cases, the process happens behind the scenes and doesn’t even involve the borrower. But in other cases—especially when you're putting more money down or purchasing privately—a professional appraisal becomes essential.

Here’s a breakdown of when appraisals are needed, who pays for them, and what happens if the appraised value isn’t what you expected.

Appraisals and Insured Mortgages (5%–19.99% Down)

If your down payment is between 5% and 19.99%, your mortgage is classified as insured. This means it’s backed by a mortgage default insurance provider—typically CMHC, Sagen, or Canada Guaranty.

Because the insurer is taking on the risk, they determine whether they’re comfortable with the purchase price. In most cases, no appraisal is needed. However, the insurer may order one if they want additional confirmation on the property value. If that happens:

• The insurer covers the cost—not the buyer.
• You’ll usually be informed, particularly if there’s any delay.
• Sometimes, you may not even realize it happened—it’s often handled directly between the insurer and the lender.

Conventional Mortgages (20% Down or More): Expect an Appraisal

When you're putting down 20% or more, there’s no mortgage insurance in place, which means the lender assumes more risk. Most of the time, this triggers the need for a full appraisal to confirm that the purchase price aligns with market value.

Key things to know:

• The broker or lender orders the appraisal on your behalf.
• The borrower pays for it, typically at the time of booking.
• Fees range from $350 to $1,500+, depending on
  • Location of the property
  • Square footage and type of home
  • Urgency of turnaround

It’s important to note that even if you pay for it, the report belongs to the lender—not to you. Your broker can usually share the appraised value and any red flags, but the full document may not be released to the buyer.

Private Sales Always Require an Appraisal

If you're buying a home in a private sale (without a real estate agent involved), a full appraisal is always required—regardless of your down payment.

What If the Appraisal Comes in Low?

Appraisal results don’t always match the purchase price. When an appraisal comes in lower than expected, it can affect your mortgage approval—especially if you’re tight on funds. But you’re not without options.

In many cases, your broker or lender can advocate on your behalf, especially if:

• There are strong recent comparable sales supporting your purchase price
• The appraiser may have missed relevant data
• The market has shifted quickly since the appraisal was completed

Disputes don’t always lead to changes, but they’re worth pursuing if you have strong evidence. Your mortgage professional will guide this process and present your case to the lender, and in some cases, a second appraisal may be requested.

Automated Valuation Models (AVMs): A Tech-Driven Alternative

For down payments between 20% and 35%, some lenders may rely on a tool called an AVM (Automated Valuation Model). This technology uses recent nearby sales, market trends, and property data to estimate the value of your home—without a full in-person appraisal.

AVMs are:

• Faster and lower-cost
• Useful for lower-risk properties in urban markets
• Accepted by some (but not all) lenders
   

If an AVM result falls within the lender’s comfort zone, it can help you skip the appraisal process entirely. But if there’s uncertainty, a full appraisal may still be required.

What to Expect During the Appraisal Process

If a full appraisal is needed, here’s what typically happens:

• For purchases, the appraiser contacts the seller’s real estate agent to arrange access.
• For refinances, they’ll coordinate directly with the homeowner.
• The appraiser will visit the property, take measurements, photos, and evaluate condition, layout, and features.
• A formal report is submitted to the lender, who uses it to confirm the property’s market value

Refinancing: Why an Appraisal Is Usually Required

When refinancing, your lender needs to confirm that there’s at least 20% equity in your home. This is a minimum requirement for most refinance approvals.

Unless your loan-to-value ratio is extremely low, expect a full appraisal. Some lenders may use an AVM for straightforward refinances, but this depends on your home’s location, market activity, and the amount you’re borrowing.

When Might an Appraisal Not Be Required?

A full appraisal may not be necessary if:

• You’re putting 35% or more down
• The home is in a well-established neighbourhood with plenty of comparable sales
• The lender accepts an AVM result
• The refinance is low-risk and under a certain threshold

Ultimately, the lender makes the call based on risk tolerance and internal policy.

Appraisal Cost Breakdown

Have Questions About Appraisals or Your Mortgage?

Appraisals are a key part of the mortgage process—but only when they’re truly needed. If you’re unsure whether your situation will require one, or you’re concerned about a recent appraisal result, I’m happy to help walk you through it.

📞 (403) 771-8771
📩 anita@anitamortgage.ca