The Need For Property Appraisals in The Mortgage Process

Understanding Property Appraisals

A property appraisal is an unbiased estimate of the true (or fair market) value of a property. It’s an essential component of the mortgage process, providing both the buyer and lender with an accurate valuation of the property in question. This valuation is conducted by a professional appraiser who assesses the property’s condition, location, and features, among other factors. The appraiser uses a combination of methods to determine the property’s value, including a physical inspection, a comparison of similar properties in the area, and an analysis of current market trends.

The Role of Property Appraisals in Mortgages

In the context of mortgages, property appraisals serve a dual purpose. Firstly, by providing an objective valuation, they assist the buyer in confirming the true value of the property. Secondly, they provide the lender with assurance that the property is worth the mortgage amount. This is important for lenders, as it reduces their risk in the event of a default on the mortgage. The property’s appraised value can also impact whether the lender will approve the mortgage.

When are Property Appraisals Needed?

Property appraisals are typically required when purchasing a new home, refinancing a mortgage, or selling a property. They provide a reliable estimate of a property’s value, which is crucial for securing a mortgage or determining a fair selling price. For instance, when purchasing a new home, an appraisal can help establish a price or value for lending purposes. Similarly, when refinancing a mortgage, an appraisal can ensure that the refinanced amount does not exceed the property’s worth.

In addition, property appraisals are also necessary in cases of marital breakdown and division of assets. When a couple decides to separate or divorce, the division of their shared assets, including any real estate, is often a complicated process. An accurate property appraisal can provide a fair market value for the property, which is essential for equitable distribution. The appraisal can serve as a neutral third-party assessment, helping to avoid disputes over the property’s value. This can be particularly helpful in contentious situations, ensuring that both parties receive a fair share of the property’s value.

Types of Mortgages That Require Appraisals

In Canada, a mortgage will require an appraisal, unless the mortgage is insured, or was previously insured, and is being renewed or switched to another lender without increasing the mortgage amount or changing the terms of the original mortgage. In the case of a property purchase, an appraisal is often required. This is particularly true when the buyer is taking out a mortgage to buy a new property. The same applies to refinance mortgages, where the homeowner is replacing their existing mortgage with a new, larger one. Specifically, an appraisal would be required for purchasers who are considered low-ratio. These are individuals who have uninsured mortgages, or in other words, are putting down a payment of 20% or more towards their home purchase.

As mentioned, an appraisal is often not required when the mortgage is insured by CMHC (putting less than 20% down). Or at renewal or switch / transfer time if the original mortgage was insured. Please note that in addition to CMHC there are currently two other companies in Canada providing similar default insurance. However, when the value of the property is in question and the lender has reason to question the purchase price with relation to the actual value then an appraisal will likely be required, such as for sale by owners, newly built homes or purchases with long closing dates.

The Process of Property Appraisals

The property appraisal process involves a thorough inspection of the property, an analysis of the local real estate market, and a comparison of similar properties in the area. The appraiser will inspect the property, and it’s features, and compare it with similar properties that have recently sold in the area. They will also consider factors such as the property’s location, size, and age. The final appraisal report provides a detailed breakdown of the property’s value, including the factors that contributed to its valuation.

The Importance of Accurate Property Appraisals

An accurate property appraisal is crucial for a smooth mortgage process. It ensures that the mortgage amount is appropriate for the property’s value, protecting both the buyer and the lender from financial risk. Furthermore, an accurate appraisal can prevent delays in the mortgage process, as discrepancies in property value can lead to complications with the mortgage approval.


This article is a brief overview of the property appraisal process when obtaining a mortgage. At Ltd., we understand the importance of accurate property appraisals in the mortgage process. We work closely with qualified appraisers to ensure that our clients receive the most accurate and fair property valuations, and we are committed to providing our clients with the information they need to make informed decisions about their mortgage options.

About Us

At Ltd, we are constantly looking for ways to provide helpful advice related to mortgages, current mortgage rates, and more. If you have any questions or need further assistance, we offer a complimentary no-obligation consultation. Feel free to reach out to us at (519) 252-9665 during our regular business hours. Alternatively, you can fill out our contact form, and your message will be promptly emailed to us. We value your time and inquiries, and we make it our priority to respond to all messages within one business day. When reaching out, please provide us with your contact details, a brief overview of your mortgage needs, and the most convenient times for you to have a consultation. We look forward to assisting you with your mortgage.

This article was brought to you by Ltd., a mortgage brokerage that is licensed with the Financial Services Regulatory Agency of Ontario (FSRA), which regulates businesses in the financial sector. The Principal Broker Sash Trajkovski has over 20 years of real estate and mortgage experience in the Ontario marketplace. You can verify our licenses by visiting the following links from FSRA’s website: our corporate license and Principal Broker license. Our mortgages services are available to all residents of Ontario. If you’re in Ontario and looking for more personalized advice and information, consider booking your Complimentary Consultation today, and let us help you understand the details that will guide you on your path to a suitable mortgage solution.

Disclaimer: Please note that this information is current as of the date of publication and is intended to be general in nature. It is not intended to provide legal, tax, financial, or other professional advice and should not be relied upon as such. Always consult with a professional for advice tailored to your individual circumstances.

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