Appraisal
An independent valuation of the property used by the lender to confirm the purchase price is reasonable and to determine maximum loan-to-value. Most files require a full appraisal; some refinances accept a desktop or automated valuation.
In a purchase, the lender orders the appraisal (or accepts an automated value) to make sure it isn't lending against an inflated price. If the appraisal comes in below your accepted offer, the lender funds against the lower of price or appraised value — and you cover the shortfall in cash. This is the most common reason a firm deal gets tight at the last minute.
On a refinance, the appraised value sets how much equity you can pull out. At 80% loan-to-value, a home appraised at $800,000 supports up to $640,000 in total mortgage debt — so a strong appraisal can be the difference between consolidating your debt and being declined.
Full appraisals run roughly $300–$500 and take a few days; many insured purchases and clean refinances qualify for a free automated valuation instead. Your broker knows which lenders lean on automated values, which can save you both the fee and the wait.
Sources
- Borrowing against home equity (Financial Consumer Agency of Canada)
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