Property Appraisals When are they required by the Lender and Why!

Lenders typically require an appraisal for two reasons :

1. For a purchase you need a property appraisal when you are doing 20% or more down payment
2. Refinances – to determine the value of your property

In the first case as there is no insurer approval required the lender must know what the market value of the property is to determine loan to value. A lender can not lend on more than 80% of the appraised value if the mortgage is not insurer approved. So your mortgage amount is determined by the value the appraiser comes up with in the property appraisal.

In circumstances where you are buying an unlisted property ie. private sale an appraisal is always required.

In the second case value is needed to determine as well what the market value is, as again the lender in the case of refinances can not lend on more than the 80% of that appraised value.

An appraiser must have the appropriate designation and accreditation. Read more about that here  

Property Appraisal institute

Brenda and Jessica are Red Deer Mortgage Brokers and have been doing mortgages in the Red Deer area for over 28 years, call us to discuss this topic on appraisals and much more.