Why Lenders Require Appraisals
Lenders want to confirm that the property is worth at least what you are borrowing against it, since the home is the security for the loan. This protects both the lender and, in a way, you as the borrower from significantly overpaying relative to market value.
Who Conducts the Appraisal
A licensed, independent appraiser is assigned, usually by the lender or through an appraisal management company. They are not chosen by you or your agent, which helps keep the valuation impartial. The appraiser visits the property, takes measurements and photos, and compares it to similar recently sold homes nearby.
What Appraisers Look At
Appraisers consider square footage, condition, upgrades, lot size, and comparable sales in the immediate area. In Toronto, they also weigh factors like proximity to transit, school zones, and any unique features of the property or building. Recent major renovations can positively affect value if properly documented.
- Comparable recent sales nearby
- Condition and upgrades
- Location specific factors
Who Pays for the Appraisal
Costs vary depending on the lender and situation, sometimes covered by the lender and sometimes charged to the borrower directly. Ask your broker upfront whether an appraisal fee applies to your specific mortgage application so it is not a surprise mid process.
Appraisals for Refinancing vs Purchasing
For a purchase, the appraisal confirms the purchase price is supportable. For a refinance, it establishes current market value to determine how much equity you can access. Either way, an outdated or overly optimistic view of your home's value can affect how much you can actually borrow.
Frequently asked questions
- Can I be present during the appraisal?
- Often yes, and it can help to point out recent upgrades or improvements, though the appraiser makes the final independent assessment.
- How long does an appraisal take to complete?
- The on site visit itself is usually brief, but the full report can take anywhere from a few days to about two weeks depending on the appraiser's workload.
- Does a higher appraisal mean a better mortgage rate?
- Not directly, but it can affect your loan to value ratio, which in some cases does influence available rates and mortgage insurance requirements.