What's the Home Really Worth?
A home appraisal gives your lender an independent, professional estimate of a property's market value. Understanding how it works — and where it can affect your financing — helps you plan a purchase or refinance with fewer surprises.
What an appraisal is
An objective opinion of value — not a home inspection.
A home appraisal is an independent estimate of a property's fair market value, prepared by a qualified, third-party appraiser. The appraiser reviews the property and the local market, then produces a written report the lender uses to help decide how much it is prepared to lend against the home.
An appraisal answers the question "what is this property worth today?" — it is different from a home inspection, which looks at the physical condition and systems of the home. An appraisal is ordered to support a lending decision; the lender relies on it as an arm's-length view of value rather than on the price a buyer and seller happened to agree on.
General information only — this is not advice or a commitment to lend. Appraisal requirements, costs and turnaround vary by lender and property, and final lending decisions rest with the lender based on the borrower, the property, documentation and the lender's guidelines.
Why lenders require one
An appraisal protects the value securing the loan.
The property is the security for the mortgage. An appraisal gives the lender independent confirmation of what that security is worth before advancing funds.
On insured (high-ratio) purchases the insurer often relies on an automated or streamlined valuation, while conventional deals with larger down payments may call for a full appraisal. Requirements differ by lender, insurer and deal.
When you refinance or borrow against equity, the lender needs current value to calculate how much you can access within its lending limits — so an appraisal is commonly requested.
Private (non-arm's-length) sales, rural or acreage properties, unique homes and properties with limited comparable sales are more likely to require a full appraisal to establish value.
How value is determined
Appraisers weigh several factors together, not one in isolation.
Comparable sales
Recent sales of similar homes in the area — "comps" — are the primary reference point. The appraiser adjusts for differences to arrive at a supportable market value.
Condition
Age, upkeep, renovations, and the quality of finishes and major systems all influence value. Well-maintained and updated homes generally support stronger values than comparable homes in poorer repair.
Location
Neighbourhood, street, proximity to amenities and schools, lot characteristics and local demand shape value. The same home can appraise differently in different locations.
Size and layout
Livable square footage, number of bedrooms and bathrooms, lot size and functional layout are compared against similar properties to support the estimate of value.
Appraisal risk
What can happen if value comes in low.
If an appraisal comes in below the agreed purchase price, it can affect the mortgage amount. Lenders typically base the loan on the lower of the purchase price or the appraised value, so a low appraisal may mean a larger down payment or additional funds are needed to bridge the gap — or that the deal has to be revisited.
This is one reason it helps to understand how a lender reviews a file before you firm up an offer. To see how appraised value feeds into the broader approval picture, read more about how underwriting works. As always, this is general information only, not advice or a commitment to lend, and final decisions rest with the lender.
Related pages
How Underwriting Works
See how lenders assess value, income and risk when reviewing a mortgage file.
Home Inspections
Understand how a condition inspection differs from an appraisal — and why both matter.
Buying a Home
Walk through the steps of a purchase, from offer to closing, and where value fits in.
Closing Costs
Plan for the one-time costs of closing, including where an appraisal fee can apply.
Questions about appraisals?
Let's talk through how it fits your purchase or refinance.