Appraisal Fee

An appraisal fee is the charge for a professional valuation of the property a lender is financing. An appraiser inspects the home and prepares a written opinion of its market value, and that report tells the lender whether the property actually supports the mortgage amount being requested.

Why lenders order an appraisal

A Canadian mortgage is secured by the property itself, so the home is the lender's collateral. Before funding a purchase, refinance, or switch, the lender wants an independent view of value rather than relying on the sale price or the borrower's estimate. The lender compares that value to the loan amount using the loan-to-value ratio. Where mortgage default insurance is required, the insurer — CMHC, Sagen, or Canada Guaranty — may also require a valuation before it insures the loan. Appraisers are independent of the lender and borrower, and their reports typically follow a standard residential form.

Who pays the appraisal fee

The borrower usually pays. Some lenders absorb or waive the cost on certain purchases, refinances, or promotional offers, and in other cases the fee is simply collected at closing, so it belongs in your closing costs budget. The amount varies with the property type, its location, and how complex the valuation is; there is no single national price, so confirm the current fee and who is responsible with your lender.

Appraisal, inspection, and tax assessment are different things

Appraisal — an opinion of market value, ordered by the lender, used to size the loan.
Home inspection — a review of the building's condition, ordered by the buyer, used to spot defects.
Property tax assessment — the value a municipality assigns for taxation, which is not the same as market value.

An inspection or a tax notice will not normally replace an appraisal. For the wider set of upfront costs, see the guide to appraisal, inspection, and title insurance costs.

If the appraisal comes in low

When the appraised value is below the purchase price, a lender generally works from the lower figure. That can shrink the loan, require a larger effective down payment, or delay approval while the file is reconsidered. A lender may also ask for a second opinion or an interior inspection.

Frequently asked questions

Who pays the appraisal fee on a Canadian mortgage?

In most cases the borrower pays, and the fee is collected by the lender or broker at closing along with other costs. Some lenders cover or waive the appraisal on certain refinances, switches, or promotional offers. Because practice varies by lender and property, ask who is responsible before you sign a commitment.

Is an appraisal always required for a mortgage?

No. Lenders may waive a full appraisal on some purchases or renewals, especially where the loan is small relative to the property's value, and some use automated valuation models instead. High-ratio files and unusual properties — rural, unique, or recently renovated homes — are more likely to need a physical appraisal.

Does a low appraisal mean my mortgage is refused?

Not automatically. It usually means the lender will lend against the lower value, so you may need more cash down or a smaller loan. In some cases a second appraisal or a review of comparable sales resolves the gap. Discuss the options with your lender before removing conditions.