The appraisal came in low.
Income checked out.
Credit was fine.
The commitment letter was issued.
Then the appraisal landed — and the deal died.
This isn’t rare anymore. It’s routine. And it’s reshaping how smart borrowers and builders are financing property across Ontario.
Why Bank Appraisals Are Suddenly So Conservative
Banks didn’t wake up and decide to be difficult. Their playbook changed.
Under tighter risk oversight, banks are leaning heavily on defensive valuation models designed to protect balance sheets — not close deals.
According to Office of the Superintendent of Financial Institutions, lenders are under continued pressure to limit real estate risk exposure. One of the easiest ways to do that?
Lower appraised values.
What’s Driving Low Appraisals in 2026
1. Backward-Looking Comparables
Appraisers are often required to:
Use older sales
Discount recent price recovery
Ignore unique property features
In shifting markets, this creates a valuation lag that punishes current buyers and refinancers.
2. Risk-Adjusted Assumptions
Banks are instructing appraisers to:
Apply marketability discounts
Stress-test exit values
Reduce value on non-cookie-cutter properties
That means:
Luxury homes
Rural properties
Mixed-use buildings
Unique renovations
Are especially vulnerable.
3. Appraisal = Credit Filter
Here’s the part borrowers miss:
Low appraisals aren’t just about value — they’re a credit control tool.
If the appraisal comes in low:
LTV jumps
The deal no longer fits policy
The bank says no — without changing rates or guidelines
It’s a clean decline.
How Low Appraisals Kill Otherwise Good Bank Deals
A $1.8M purchase appraised at $1.6M means:
Larger down payment required
Re-qualification under tighter ratios
Or a full cancellation
For refinances, it’s worse:
Equity disappears on paper
HELOC limits shrink or freeze
Consolidation plans collapse
According to Canada Mortgage and Housing Corporation, appraisal friction is increasingly delaying or derailing transactions in high-value Ontario markets.
How Private Lenders Look at Value Differently
Private lenders aren’t ignoring risk — they’re measuring it differently.
Instead of asking:
“What’s the lowest defensible value?”
They ask:
“What’s the realistic value in today’s market — and how protected is the loan?”
Key differences in approach:
1. Multiple Valuation Inputs
Private lenders may consider:
Appraisals
Broker price opinions
Comparable listings
Exit strategy pricing
Not just one conservative report.
2. Equity First, Not Perfection
Private lending focuses on:
True equity position
Sensible loan-to-value
Downside protection
Not squeezing every deal into a rigid formula.
3. Property Story Matters
Banks underwrite files.
Private lenders underwrite situations.
They look at:
Location quality
Property uniqueness
Borrower plan and timeline
That nuance matters in today’s market.
Why This Matters More in Ontario
Ontario’s market amplifies appraisal risk:
Higher price points
Fewer perfect comparables
More custom homes and mixed-use properties
According to Bank of Canada, higher-for-longer rates combined with cautious lending are reshaping credit access — especially where values are harder to standardize.
Translation: good properties are getting undervalued on paper.
The Biggest Mistake Borrowers Are Making
Assuming:
“If the bank appraisal is low, the deal is dead.”
It’s not.
It just means:
The bank’s model doesn’t fit the property
Timing matters more than rate
Another valuation lens is needed
Borrowers who pivot early keep control.
Those who wait often lose deposits, timelines, or leverage.
Final Thought: Value Isn’t Just a Number — It’s Context
In 2026 Ontario, appraisals are no longer neutral.
They’re conservative by design.
Bank deals are dying not because properties lack value — but because value is being measured through the narrowest possible lens.
Borrowers who understand this shift are structuring smarter, faster, and with less stress.
Those who don’t are learning too late.
Your equity deserves more — especially when valuation becomes the bottleneck.