What Is a Home Appraisal and Why It Matters

You've had your offer accepted and your financing feels locked in — then your lender orders a home appraisal. This independent estimate of the property's value is one of the most important (and least understood) steps in buying a home. Here's what an appraisal is, why lenders insist on it, and how to handle the dreaded "low appraisal" in Ontario.

Key takeaways

• A home appraisal is an independent, professional estimate of a property's market value, usually ordered by your lender.
• In Ontario, an appraisal typically costs $300–$600 and is paid by the buyer as part of closing costs.
• Lenders use the appraisal to confirm the home is worth enough to secure the mortgage.
• A low appraisal can create a financing gap you may have to cover in cash.
• An appraisal is not the same as a home inspection — one checks value, the other checks condition.

What is a home appraisal?

A home appraisal is an unbiased, professional opinion of a property's fair market value on a given date. It's carried out by a qualified, licensed appraiser who has no stake in the transaction. The appraiser inspects the home, measures it, notes its condition and features, and compares it with recent sales of similar nearby properties (called "comparables" or "comps").

Most appraisals in Ontario are ordered by the lender, not the buyer — even though the buyer usually pays for it. The lender wants independent confirmation that the home is genuinely worth what you're borrowing against it. If you ever default, the property is the lender's security, so its real value matters to them.

Why lenders require an appraisal

Your mortgage is a loan secured against the home. A lender will only advance funds up to a certain percentage of the property's appraised value — not necessarily the price you agreed to pay. The appraisal protects the lender from lending more than the home is worth, and it indirectly protects you from overpaying.

Appraisals are especially common when you have a larger down payment (a conventional, uninsured mortgage). With a smaller down payment, the loan is usually insured through CMHC or another insurer, and the insurer often relies on an automated valuation instead — see our guide to CMHC mortgage insurance. Either way, your borrowing power is anchored to value, which is why it pays to know your numbers early with the affordability calculator.

Appraisal vs inspection

An appraisal estimates what the home is worth. A home inspection assesses its physical condition — roof, wiring, plumbing and structure. They serve completely different purposes; learn more in our guide to the home inspection.

What it costs in Ontario

An appraisal is one of several due-diligence costs you'll pay around closing. In Ontario, a standard residential appraisal usually runs $300 to $600, depending on the property type, location and complexity. It sits alongside other closing costs you should budget for.

These are only a slice of the total. Budget roughly 1.5%–4% of the purchase price for all closing costs combined — our closing costs in Ontario guide breaks down every line item, or estimate yours with the closing cost calculator.

What happens if the appraisal comes in low

A "low appraisal" happens when the appraised value comes in below your agreed purchase price. This matters because your lender bases the mortgage on the lower of the two figures — leaving a gap you may need to cover.

Say you agreed to pay $800,000 but the home appraises at $760,000. Your lender treats $760,000 as the value, so the amount they'll lend shrinks. You're left to bridge the $40,000 difference — typically with more cash on top of your down payment.

• Top up the gap with cash — the most common route if you have reserves.
• Renegotiate the price with the seller using the appraisal as evidence.
• Dispute the appraisal by providing additional comparable sales.
• Walk away — only possible if your offer included a financing condition (see conditional vs firm offers).

Protect yourself with a financing condition

Making your offer conditional on financing gives you an exit if the appraisal sinks your mortgage. In hot markets buyers often waive it to win — but that shifts the risk squarely onto you. Read more in how to make an offer in Ontario.

Buy smarter — and keep more — with HOMEH

An appraisal keeps you from overpaying; HOMEH helps you keep more of what you've got. As a licensed Ontario brokerage, HOMEH gives eligible buyers the industry's highest Cashback Rebate — money that can cover your appraisal, inspection and other closing costs many times over. Start with the full roadmap in how to buy a house in Ontario, then estimate your rebate with the cashback calculator.