In short
It doesn't matter what you offered or what the seller wanted. The lender lends against the appraised value.
If the appraisal comes in below your price, the lender may lend less, and you cover the gap from your own cash.
How it works when you buy
An appraisal is a professional opinion of a home's market value on a given date. Lenders order one, or use an automated valuation, to confirm the home is worth enough to secure the mortgage.
In Canada, residential appraisers often hold a designation from the Appraisal Institute of Canada, such as CRA or AACI. The appraiser looks at the home's size, condition and features and compares it with recent sales of similar homes nearby.
The appraisal belongs to the lender's process. It isn't a home inspection and won't tell you about hidden defects.
Appraisals also come up when you refinance, take out a home equity line of credit or settle an estate. In each case the lender or party asking wants an independent, documented value.
What happens if it comes in low
Most lenders base the mortgage on the lower of the purchase price and the appraised value. If the appraisal is below what you agreed to pay, the mortgage shrinks and you have to cover the difference in cash.
On a conditional offer, a financing condition gives you some room to sort it out. On a firm offer, you're committed to close at the agreed price, so a low appraisal is your problem to solve.
In a fast market, homes can sell above what recent sales support, which is when low appraisals happen most. If you plan to bid over asking, talk to your lender first and keep extra cash available for a possible gap.
Appraisal vs assessed value vs market value
An appraisal is a current, property-specific estimate for a lender. Assessed value is MPAC's figure for property tax, still based on 2016 values in Ontario. Market value is what a buyer actually pays in today's market, and the appraisal is the lender's check on it.
When all three numbers differ, the appraisal is the one that decides your mortgage, so it's the one to plan around when you make an offer.
Common questions about appraisal
What happens if an appraisal comes in lower than the offer?
Your lender will usually lend based on the lower appraised value, so you cover the shortfall in cash. You might ask for a second appraisal, try another lender, or renegotiate if your offer is still conditional. On a firm offer, you're still bound to close at the agreed price.
Who pays for a home appraisal in Ontario?
It depends on the lender, and many cover the cost of the appraisal on a purchase. Others pass the fee to the borrower, especially for refinances or home equity loans. Ask your lender or mortgage broker before you apply. Some lenders use an automated valuation instead, with no fee at all.
Is an appraisal the same as a home inspection?
No, an appraisal estimates value for the lender, while an inspection checks the home's condition for you. The appraiser won't look for hidden problems like roof leaks or wiring issues. Most buyers benefit from a separate home inspection. Keep both in mind when you set your conditions.
Sources
General information for Ontario, updated October 2026. Not legal, tax or mortgage advice. Rules change, so confirm with your lawyer, lender or the source above before you rely on it.