• When Does My Mortgage Require An Appraisal?

    Short answer: whenever the bank sees risk with the value.

    Here are some scenarios where the bank will or will not require an appraisal:

    1. When you purchase a home with less than 20% down, the bank usually does not require an appraisal. Why? Because the mortgage is insured by CMHC so there is very little risk for the bank.
    2. When you purchase a home for a price that is way over asking, an appraisal will likely be required. Even if it is insured by CMHC, the bank and/or the insurer may ask for an appraisal. This is because the bank wants to make sure you didn’t overpay. If you did, the lender may decrease the amount that they will lend, and you as the homebuyer will need to make up the difference.
    3. If you are refinancing, the bank will usually ask for an appraiser to determine the value. This is because banks generally will only refinance up to a maximum of 80% of the value of the home. When the amount of the mortgage requested is much less than that (for example, you are refinancing $200K on a $900K home), they may not require an appraisal.
    4. If you are purchasing a new construction home, an appraisal will almost always be required. This is not only to check the value, but also to make sure that it is complete.
    5. If the home you are purchasing has any aspects that raises an eyebrow, an appraisal will be required. Examples are: hobby farms, commercial properties, rural properties, properties with special features like outbuildings etc.
    6. If you are purchasing a home privately, an appraisal will almost always be required. This is because the market didn’t decide on the purchase price (i.e. it wasn’t presented to the masses on the MLS system and open to bidding), so it could be easily manipulated.
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