Low Appraisal Mortgage: Can Your Deal Still Close? | Pegasus

low appraisal
This article is for informational purposes only and does not constitute financial advice. Speak with a licensed mortgage professional before making any mortgage decisions.

Quick Answer

Yes — you can often still get a mortgage in Canada even when the appraisal comes in below the purchase price, but the deal usually needs an adjustment. Canadian lenders base the mortgage on the lesser of the appraised value or the purchase price, so a low appraisal creates a funding gap you must cover, renegotiate, or work around.
Quick Answer
  1. Canadian lenders lend against the lesser of appraised value or purchase price, so a low appraisal shrinks the mortgage.
  2. Four practical paths: renegotiate the price, top up your down payment, dispute the appraisal, or re-shop the file to a new lender.
  3. Firm offers with no financing condition carry the highest risk because backing out can put the deposit at stake.
  4. An independent broker with a wide lender panel can often save a deal a single bank has already declined.

When the Appraisal Comes In Low

You accepted an offer. The lender ordered an appraisal. A few days later, an email lands with a number that is lower than the price you agreed to pay. Your stomach drops. The closing date is on the calendar. The deposit is already sitting in the brokerage’s trust account.

Take a breath. A low appraisal is stressful, but it does not automatically kill your mortgage or your purchase. In most Canadian markets, buyers work through appraisal shortfalls every week — often without their neighbours ever hearing about it. The next few days matter, but you have real options, and this guide walks through every one of them in plain English.

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72 hrstypical decision window after appraisal

Why a Low Appraisal Matters to Your Lender

Canadian lenders approve a mortgage against the lesser of the appraised value or the purchase price. When the appraisal comes in below what you agreed to pay, the lender lowers the amount they will advance, and the difference — often called the funding gap — has to come from somewhere other than the mortgage itself.

An appraisal is an independent estimate of what a property is worth, ordered by the lender and completed by a licensed appraiser. The lender uses that number to calculate your loan-to-value ratio, or LTV — the size of the mortgage as a percentage of what the property is worth.

If you offered $700,000 and the appraiser values the home at $670,000, the lender treats $670,000 as the ceiling. A 20% down payment now has to be measured against that lower number, not your offer. The mortgage shrinks, and unless something else changes, you have to bring more cash to closing to keep the deal alive. You can estimate what you can afford before you finalize any next steps.

Quick Start — Pick Your Path

There are four practical paths when an appraisal comes in low: renegotiate the price with the seller, top up your down payment with additional cash, dispute the appraisal through a reconsideration of value, or re-shop your file to a different lender whose appraisal panel may return a different number. Most successful outcomes combine two of these.
Renegotiate
Ask the seller to meet the appraised value or split the difference. Fastest path if the seller is motivated.
Top Up
Cover the gap from savings, an RRSP Home Buyers’ Plan withdrawal, or a family gift. Most reliable if the cash is available.
Dispute (ROV)
Submit recent comparable sales the appraiser may have missed. Requires evidence, not just disagreement.
Re-shop
Send the file to a different lender with a different appraisal panel. Where an independent broker adds the most value.

Not sure where you sit? You can start an instant pre-approval to see what a fresh lender view of your file looks like.

Your Four Options Side-by-Side

Each option carries a different mix of speed, cost, likelihood of success, and risk. Renegotiation is often the fastest and cheapest if the seller is motivated. Topping up is the most reliable if you have the cash. Disputing takes the most patience. Re-shopping to a new lender is where an independent broker typically adds the most value.

Reading through the options in prose can feel abstract when the closing date is close. The table below lines up all four side-by-side so you can see, at a glance, which one fits your situation. This is also the moment where why a broker beats a single bank becomes obvious: an independent broker can pursue several of these paths in parallel, while a single bank can only tell you what its own appraisal panel decided.

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Four Ways to Handle a Low Appraisal — At a Glance

Compare timeline, cost, likelihood, and risk across the four common paths a Canadian buyer can take.

Option Timeline Cost Likelihood Main Risk
Renegotiate Price 1–3 days Low Moderate Seller may refuse
Top Up Down Payment Same day High High (if cash on hand) Depletes reserves
Dispute Appraisal (ROV) 3–7 days Minimal Low to moderate May still be denied
Re-shop to New Lender 2–5 days Low Moderate to high Timeline pressure
Source: Pegasus in-house guidance; OSFI B-20 framework. Illustrative — actual outcomes vary by lender, market, and file.
Pegasus Mortgage Lending Center Inc. FSRA Lic # 11479

None of these options is a guarantee. What they share is that each one gives you something to do next, rather than sitting and waiting for the deal to fall apart.

How the Funding Gap Math Actually Works

The funding gap is the difference between what you agreed to pay and what the lender will advance based on the appraised value. If you offered $700,000 with a 20% down-payment plan and the appraisal returns $670,000, the mortgage drops from $560,000 to $536,000. You now need $164,000 down instead of $140,000 — a $24,000 shortfall to cover.

Consider an illustrative example. You offered $700,000 on a home. You had planned a 20% down payment of $140,000 and a $560,000 mortgage. The appraisal comes back at $670,000. The lender will now lend up to 80% of $670,000, which is $536,000 — not $560,000.

To close at the agreed $700,000 price, you now need $700,000 minus $536,000 in cash, which is $164,000. That is $24,000 more than your original plan. The extra cash can come from savings, an RRSP Home Buyers’ Plan withdrawal, a gifted down payment from a family member, or a renegotiation that lowers the purchase price. You can run the numbers on your down payment to see how each of those levers reshapes the deal.

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Where the Money Comes From When Appraisal Falls Short

Illustrative: a $700,000 offer with a $30,000 appraisal shortfall on a 20% down-payment plan.

Original Down
$140,000
Adjusted Down
$164,000
Extra Cash Needed
+$24,000
Source: Pegasus /down-payment-calculator/; CMHC public guidance. Illustrative values only.
Pegasus Mortgage Lending Center Inc. FSRA Lic # 11479

The numbers above are illustrative, not a quote — your actual figures depend on your lender, your offer, and the final appraised value. What matters is the shape of the math: the mortgage shrinks against the appraisal, and the cash has to come from somewhere.

Insured Mortgages and Low Appraisals

If your down payment is less than 20%, your mortgage is insured by one of three default insurers — CMHC, Sagen, or Canada Guaranty. A low appraisal on an insured mortgage can trigger a fresh look at the insurance premium, the loan-to-value ratio, and whether your file still qualifies under the OSFI B-20 stress test at the greater of contract rate plus 2% or 5.25%.

Insured mortgages have less flexibility on a low appraisal than uninsured ones. The three default insurers — CMHC, Sagen, and Canada Guaranty — each set their own guidelines, but all three tie insurance eligibility to the lesser of appraised value or purchase price.

If you’re a first-time buyer, this matters even more because your down payment is often close to the minimum. Our first-time buyer guide walks through how insured-mortgage math changes when the appraisal shifts. The CMHC First-Time Home Buyer Incentive was retired on March 31, 2024 and is no longer available, so it cannot be used to bridge a shortfall.

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Who Insures a High-Ratio Canadian Mortgage

Three default insurers back Canadian mortgages when the down payment is under 20%. A broker can route the file to whichever insurer’s guidelines fit your situation best.

Source: CMHC public reporting. Market-share proportions illustrative — actual splits vary year-to-year.
Pegasus Mortgage Lending Center Inc. FSRA Lic # 11479

A Step-by-Step Roadmap for the Next 72 Hours

Move quickly but calmly. Call your broker within the first four hours, review your offer conditions the same day, gather comparable sales evidence within 24 hours, decide your branch within 48 hours, and execute within 72 hours. Speed matters because most offers have tight financing and closing timelines.
  1. 1
    Call your broker.This is the single most useful call you can make. An experienced broker will read the appraisal, check the comparable sales the appraiser used, and give you an honest read on your options. Razi Khan, Founder and Mortgage Broker at Pegasus has walked hundreds of Canadian buyers through this exact conversation.
  2. 2
    Review your offer conditions.Is your offer firm or conditional? Is there a financing condition still in play? These answers determine which paths are open to you.
  3. 3
    Gather evidence.If you plan to dispute, pull the most recent comparable sales in the neighbourhood. If you plan to renegotiate, share the appraisal with your realtor to open the conversation with the seller.
  4. 4
    Decide and execute.Commit to one primary path and one backup. Broker-led deals can often run two paths in parallel — for example, requesting a reconsideration of value while quietly re-shopping to a second lender.
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The First 72 Hours After a Low Appraisal

A calm, sequenced action plan for the hours immediately after the appraisal report lands.

  • Hour
    0
    Appraisal report received
    Read the report carefully. Note the appraised value and the comparable sales the appraiser used.
  • Hour
    1–4
    Call your broker; review the offer
    Confirm whether your offer has a financing condition still in play. Walk through the four paths together.
  • Hour
    4–24
    Gather comparable sales
    Pull recent neighbourhood comps with your realtor. Request a reconsideration of value if the evidence supports it.
  • Hour
    24–48
    Choose your primary path
    Renegotiate, top up, dispute, or re-shop. Pick one primary path and one backup so no time is wasted if the first stalls.
  • Hour
    48–72
    Execute
    Broker submits to the new lender or files the ROV. Realtor opens renegotiation. Confirm every next step in writing.
Source: Pegasus in-house workflow. Timelines illustrative — actual timing depends on lender, offer, and closing date.
Pegasus Mortgage Lending Center Inc. FSRA Lic # 11479

Firm Offer, Conditional Offer, and the Deposit

The most important document in this whole process is the agreement of purchase and sale. If your offer contains a financing condition, you typically have a clean exit if no lender will advance the full mortgage — your deposit is generally returned, subject to the specific wording.

If your offer is firm — meaning you waived the financing condition to win the bid — the calculus is different. Walking away can put the deposit at stake and, in some provinces, expose you to further claims from the seller. Provincial rules vary: Ontario, British Columbia, and Alberta each treat firm-offer disputes slightly differently, and in Quebec, closings are handled by a notary rather than a lawyer, with additional formal steps. For a broader view of how the process fits together, see how Pegasus supports you from pre-approval to closing. When the offer is firm and the appraisal is low, moving fast on the re-shop and top-up paths becomes essential.

Common Mistakes to Avoid

  • Waiting to see if the lender changes its mind. Lenders rarely revise an appraisal on their own — the clock keeps ticking while you wait.
  • Assuming the appraisal is the property’s true value. Appraised value is one appraiser’s opinion, on one day, using specific comparable sales. Another appraiser may see it differently.
  • Panic-selling from your investments. Liquidating an RRSP or non-registered account without checking tax and penalty consequences can cost more than the funding gap itself.
  • Skipping the reconsideration of value process. If you have strong recent comparables, requesting a formal review costs nothing but a bit of time.
  • Trying to hide the low appraisal from a second lender. Underwriters share more information than buyers realize — be upfront so your broker can position the file properly.
  • Overlooking the deposit clause in the agreement. Provincial rules and the exact contract wording determine what happens if you walk away, not the general advice you read online.

Frequently Asked Questions

What happens if my house appraises for less than I offered?

The lender will typically approve the mortgage against the lower appraised value, not your offer price. That creates a funding gap you can close by renegotiating with the seller, adding more cash to your down payment, disputing the appraisal, or re-shopping the file to a different lender.

Can I still get a mortgage if the appraisal is low?

Yes, often. A low appraisal reduces the size of the mortgage a lender will advance, but it does not automatically disqualify you. If you can cover the shortfall or negotiate the price down, the deal can typically still close on time.

Do I lose my deposit if the appraisal comes in low?

It depends on your offer. If your offer includes a financing condition and the lender declines the required mortgage, the deposit is generally returned. If you waived the financing condition and cannot close, the deposit may be at risk. Provincial rules and contract wording apply.

Can I ask for a second appraisal in Canada?

You can request what is called a reconsideration of value, or ROV. You submit recent comparable sales the original appraiser may not have used. If the ROV is denied, a different lender using a different appraisal panel may still return a different value on the same home.

Will the seller lower the price if the appraisal is low?

Sometimes. A motivated seller who wants to close on time may agree to meet the appraised value or split the difference. In slower markets this is more common. In competitive markets, sellers may prefer to relist rather than reduce.

How much extra cash do I need if the appraisal is short?

Typically, the shortfall equals the gap between purchase price and appraised value, because the lender caps the mortgage against the lower number. On a $30,000 shortfall with the same down-payment percentage, you often need close to $30,000 more in cash to keep the deal on track.

Does a low appraisal affect a CMHC-insured mortgage?

Yes. CMHC, Sagen, and Canada Guaranty all base insurance eligibility on the lesser of appraised value or purchase price. A low appraisal can change the insured loan amount and, in some cases, the premium. Your file must still qualify under the OSFI B-20 stress test at the greater of contract rate plus 2 percent or 5.25 percent.

Can a mortgage broker help if my bank said no because of the appraisal?

Often, yes. An independent broker works with fifty-plus lenders, each with its own appraisal panel. A different lender’s appraiser may value the property differently. A broker can also help package the file for a lender whose guidelines fit your situation better than the bank you started with.

Get a Second Set of Eyes on Your File

A low appraisal is rarely the end of the deal. Pegasus works with 50+ Canadian lenders and can often find a path a single bank cannot.

Start Your Instant Pre-Approval
This article is for informational purposes only and does not constitute financial advice. Speak with a licensed mortgage professional before making any mortgage decisions. Regulatory framing reflects Canadian federal and Ontario-provincial rules as of July 2026; provincial variations apply. Pegasus Mortgage Lending Center Inc. — FSRA Lic # 11479.
Razi Khan — Founder, CEO and Mortgage Broker at Pegasus Mortgage Lending

About the author

Razi Khan

Founder, CEO & Licensed Mortgage Broker · Pegasus Mortgage Lending · Toronto, Ontario · FSRA Lic # 11479

Razi Khan is the Founder, CEO, and a licensed Mortgage Broker at Pegasus Mortgage Lending Center Inc., based in Toronto. With over 20 years of experience in the Canadian mortgage industry, Razi has personally guided more than 3,000 clients through some of the most complex and high-stakes financial decisions of their lives — from first-time purchases in the GTA to refinancing strategies, alternative lending solutions, and cross-border mortgages for Canadians buying in the United States.

Razi founded Pegasus in October 2008, launching the brokerage at the height of a global financial crisis. He works across the full spectrum of borrower profiles, with particular expertise in complex files including self-employed borrowers, credit-challenged clients, and investors building multi-property portfolios.

Sources & References

  1. Office of the Superintendent of Financial Institutions (OSFI). Guideline B-20: Residential Mortgage Underwriting Practices and Procedures. osfi-bsif.gc.ca
  2. Canada Mortgage and Housing Corporation (CMHC). cmhc-schl.gc.ca
  3. Sagen Canada. sagen.ca
  4. Canada Guaranty. canadaguaranty.ca
  5. Financial Services Regulatory Authority of Ontario (FSRA). fsrao.ca
  6. Government of Canada — First Home Savings Account and RRSP Home Buyers’ Plan. canada.ca
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