Do private lenders require an appraisal?
Yes, in nearly every case. Private lending in Canada is equity-based, so the appraisal sets the loan-to-value calculation that decides how much you can borrow, not your income or credit alone.
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Do you need an appraisal for a private mortgage?
Yes, on nearly every deal. A private mortgage is equity-based lending, so the lender needs a current, independent appraisal to confirm the property’s value before it will set a loan amount. Even short-term or bridge loans from a private lender almost always require one, because the appraisal is the foundation of the entire underwriting decision.
Private lenders are not banks. Most work with individual investors, mortgage investment corporations, or syndicated funds that lend against real estate equity rather than a borrower’s income statement.
A licensed mortgage brokerage arranges the file, but the lender itself decides how much comfort it needs in the property before funding, and an appraisal is almost always part of that comfort.
The exceptions are rare. A lender already very familiar with a property, such as a second mortgage placed behind its own existing first mortgage, might rely on a recent internal valuation instead of ordering a fresh report. That is unusual, and most borrowers should plan on an appraisal being part of the process.
The citable fact: Private lenders in Canada order an appraisal on nearly every file because the appraised value, not the borrower’s income, sets the loan amount.
Why does the appraisal matter more to a private lender than your income?
Private lending is equity-based lending. The lender’s main question is how much room exists between the appraised value and the total debt registered against the property, not whether your income covers a debt service ratio. A wide equity cushion can offset weak income, bruised credit, or a complex income source that a bank would decline.
A bank calculates gross debt service (GDS) and total debt service (TDS) ratios from your pay stubs and tax documents. A private lender starts from the appraisal instead, because its security is the real estate itself, not your monthly cash flow.
That does not mean income is ignored entirely, since most private lenders still want a plausible plan for repayment or exit. It does mean the property’s appraised value carries far more underwriting weight than it would at a bank. For a closer look at how the two approaches differ, see equity-based versus income-based lending.
The example below is illustrative only, showing how the ratio is calculated, not a quote for any specific file.
Show the math: how loan-to-value is calculated (illustrative)
| Product | Loan-to-value ceiling |
|---|---|
| Conventional refinance | Up to 80% LTV |
| HELOC, standalone | Up to 65% LTV |
| HELOC combined with a mortgage | Up to 80% LTV combined (65% HELOC portion, 20% equity required beyond that) |
These figures are the ceilings that apply to conventional, institutional lending. A private lender sets its own maximum loan-to-value file by file, and that number is not addressed on this page. Ask your broker what a specific lender will do for your property.
The citable fact: In equity-based private lending, the appraisal, not the borrower’s income documents, is the primary input to the lender’s loan-to-value calculation.
Who orders the appraisal and who pays for it?
The lender, or the brokerage acting on the lender’s instructions, orders the appraisal and chooses the appraiser. The borrower almost always pays the fee, either upfront before the appraisal is booked or added to the closing costs. Under Ontario’s Mortgage Brokerages, Lenders and Administrators Act (MBLAA), any lender or broker fee connected to the file, including an appraisal cost the lender arranges, must be disclosed to you in writing before you sign.
Lenders insist on choosing the appraiser rather than accepting the borrower’s own choice. That keeps the appraiser independent of the person who benefits from a higher number, which protects both the lender’s security and the integrity of the report.
In Alberta, Pekoe is licensed by RECA (the Real Estate Council of Alberta), and the same practical principle applies: the lender arranges and controls the appraisal even though the borrower typically pays for it. For a full look at how private lending works in each province, see our guides to private mortgage lending in Ontario and private mortgage lending in Alberta.
The citable fact: the lender selects and orders the appraisal on a private mortgage file, and the cost is disclosed to the borrower in writing before signing, as required under Ontario’s Mortgage Brokerages, Lenders and Administrators Act.
Can you use an appraisal you already paid for?
Usually not. A private lender will normally require its own appraisal, ordered directly by the lender or by an appraiser on its approved list, even if you already paid for one for a different lender or purpose. Some lenders will accept an existing report through a reliance letter, addressed to them by the original appraiser, for an additional fee.
The reason comes back to independence. An appraisal you commissioned on your own was addressed to you, not to the lender, so the lender has no direct legal reliance on it.
A reliance letter fixes that gap by extending the appraiser’s liability to the new lender, but not every appraiser or lender will agree to one, and the report usually needs to still be recent enough to be useful. Three things typically need to line up:
- The original appraiser is willing to add the new lender as a reliant party.
- The lender is willing to accept a reliance letter instead of ordering a fresh report.
- The report is still recent enough under that lender’s own policy.
The citable fact: a private lender will rarely accept an appraisal you commissioned independently unless the original appraiser adds that lender as a reliant party through a signed reliance letter.
What is a drive-by or desktop appraisal, and when is it enough?
A full appraisal includes an interior and exterior inspection with a written narrative report. A drive-by, or exterior-only, appraisal skips the interior and relies on the exterior and comparable sales. A desktop appraisal uses public records, listing data, and comparable sales with no site visit at all, and lenders tend to accept the lighter options on lower-risk files with a strong existing equity position.
| Type | What it involves | When a lender is more likely to accept it |
|---|---|---|
| Full appraisal | Interior and exterior inspection, comparable sales analysis, written narrative report | First mortgages, higher-risk or complex properties, and most purchase files |
| Drive-by / exterior-only | Exterior inspection and photos, comparable sales, no interior visit | Refinances and second mortgages with a strong equity position and a straightforward property |
| Desktop / AVM-assisted | Public records, listing history and comparable sales reviewed remotely, no site visit | Low-risk files where the lender already has recent data on the property or neighbourhood |
Which type applies is the lender’s decision, not the borrower’s, and it depends on the file’s risk rather than a fixed rule. A first mortgage on a property the lender has never seen is a poor candidate for a desktop report.
A well-documented second mortgage behind a small existing first, on a property type the appraiser already knows well, is a more realistic candidate for something lighter.
The citable fact: private lenders choose between a full, drive-by, or desktop appraisal based on the file’s risk and the property’s complexity, not a fixed rule that applies to every deal.
What happens if the appraisal comes in lower than expected?
A lower appraised value raises your calculated loan-to-value for the same requested loan amount, which can push the file outside what your commitment letter allows. The lender may reduce the loan amount, ask for more equity or additional security, or in some cases decline the file. The exact response depends on the lender’s own policy and the terms already set out in your commitment.
Loan-to-value is a simple ratio: the loan amount divided by the appraised value. When the appraised value drops and the requested loan amount stays the same, the ratio automatically climbs.
Show the math: how a lower appraisal changes loan-to-value (illustrative)
That jump from roughly 73% to roughly 83% is the entire problem. This page does not state what maximum loan-to-value a specific private lender will accept, since that varies lender to lender and file to file.
Your commitment letter, and your broker, will tell you exactly where your file stands once the appraisal is in hand.
The citable fact: a lower appraised value increases the calculated loan-to-value on the same requested loan amount, which is why private lenders treat the appraisal as the most consequential document in the file.
How long is an appraisal good for?
There is no single rule that applies to every lender. Most private lenders treat an appraisal as current for a limited window, then ask for an update letter or a new report if the file takes longer to close than expected. The exact window is set by each lender’s own policy, so ask your broker before assuming an older report will still be accepted.
Deals that stall between conditional approval and funding are the most common reason an appraisal expires before closing. If your file is taking longer than expected, ask early whether an update is needed rather than finding out at the funding table.
The citable fact: how long a private lender treats an appraisal as valid is set by that lender’s individual policy, not by one fixed rule across the industry.
Can you see the appraisal you paid for?
In most cases yes, because you are the one paying the fee, though the report technically belongs to the party who ordered it. Some lenders provide the full narrative report, others provide only a summary of the value and key comparables used. Ask upfront what you will receive, since practice varies by lender and by appraiser.
This matters beyond curiosity. If the appraisal comes in lower than expected, seeing the comparable sales the appraiser used lets you and your broker check whether a second opinion or an update makes sense before you accept a reduced loan amount.
The citable fact: borrowers who pay for a private mortgage appraisal can usually request a copy, though whether that is the full report or a value summary depends on the lender and the appraiser.
What makes an appraiser acceptable to a lender?
A lender wants an appraiser with no personal or financial connection to the borrower, working knowledge of the local market and the specific property type, and in most cases a recognised professional designation, such as AACI or CRA through the Appraisal Institute of Canada (AIC). Lenders funding across Ontario and Alberta typically keep an approved list rather than accepting any appraiser a borrower proposes.
Independence is the non-negotiable part. An appraiser who knows the borrower personally, or who stands to benefit from the deal closing, is not someone a private lender will accept, regardless of credentials.
Local knowledge matters almost as much. An appraiser unfamiliar with a rural property, a mixed-use building, or a specific neighbourhood is more likely to produce a report the lender questions, which slows the file down.
The citable fact: private lenders require an appraiser who is independent of the borrower, familiar with the property type and location, and in most cases holds a recognised designation through a body such as the Appraisal Institute of Canada.
Where else can you find answers on private mortgage appraisals?
These three pages cover the underwriting and paperwork side of private lending in more depth.
- How does equity-based lending differ from income-based lending?
- What documents does a private mortgage lender need?
- Why are private mortgage rates higher?
For real file examples, see our private mortgage case studies. The full set of questions lives on the Ask a Broker hub.
Frequently asked questions
Do all private lenders require an appraisal?
Almost all do, because the loan is secured by the property and the appraisal sets its value. A handful of very familiar repeat-lending situations might skip a fresh report, but that is the exception, not something to plan around.
Who chooses the appraiser on a private mortgage?
The lender, or the brokerage acting on the lender’s instructions, chooses the appraiser, not the borrower. This protects the independence of the report and the lender’s confidence in the value.
Does the borrower always pay for the appraisal?
In almost every case, yes, whether it is collected upfront or added to the closing costs. Any appraisal-related cost forms part of the fees Ontario’s Mortgage Brokerages, Lenders and Administrators Act requires be disclosed to you in writing before you sign.
How much does a private mortgage appraisal cost?
We are not publishing a figure here. Appraisal fees vary by property type, location, and the type of report ordered, and Dan needs to confirm current numbers with an appraiser before this cluster states a cost.
Can I choose my own appraiser for a private mortgage?
Generally no. The lender selects the appraiser to keep the report independent, though some lenders maintain a short list your broker can share with you.
Will a bank appraisal work for a private lender?
Rarely on its own. The private lender usually wants the appraisal addressed to them directly or backed by a reliance letter from the original appraiser.
What is the difference between a drive-by and a full appraisal?
A full appraisal includes an interior and exterior inspection, while a drive-by covers only the exterior and comparable sales. Lenders reserve the lighter option for lower-risk files with a strong equity position.
What happens if my private mortgage appraisal comes in low?
Your calculated loan-to-value rises for the same requested loan amount, which can put the file outside what your commitment letter allows. The lender may reduce the loan, ask for more equity, or in some cases decline the file, depending on their policy.
How long does a private mortgage appraisal take?
This varies by appraiser, property, and report type, and we do not have a confirmed turnaround figure to publish here. Ask your broker for a current estimate once your file is underway.
Does the chat on this page connect to a real broker?
Yes. It connects you to the Pekoe team during business hours, and outside those hours your question goes to a licensed broker who replies directly, not an automated persona.
Is a private mortgage appraisal different in Ontario and Alberta?
The underwriting logic is the same in both provinces, since the appraisal sets the value the lender relies on. The regulator differs, FSRA in Ontario and RECA in Alberta. Ontario requires written fee disclosure under the MBLAA.
Does the appraiser also inspect the property’s condition, like a home inspector would?
No. An appraisal focuses on establishing market value using comparable sales, not a detailed inspection of mechanical systems or defects. A separate home inspection is a different report, and some lenders will ask for both on a purchase file.
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