In a falling market, your pre-construction unit may be appraised below the price you agreed to pay. Lenders base the mortgage on the lower of the appraised value or contract price — meaning you must cover the gap with additional cash on closing day. This calculator shows exactly how much more you'll need.
If your pre-construction unit appraises below the contract price at closing, this shows how much additional cash you'll need and what your options are.
Enter your pre-construction contract price (what you agreed to pay), the appraised value from the lender's appraisal at closing, your original down payment paid at signing, your mortgage rate, and amortization. The calculator immediately shows how much additional cash you need on closing day and what your new monthly payment will be.
The Appraisal Gap is the difference between the contract price and the appraised value. Lenders will only mortgage a percentage of the lower of those two numbers. If your unit appraised at $680,000 but you agreed to pay $850,000, the lender's mortgage is based on $680,000 — not $850,000.
The Additional Cash Needed at Closing is the critical number. It represents the shortfall between the maximum mortgage the lender will provide (based on appraised value) and the total amount you owe (contract price minus deposits already paid). This cash must be available on closing day — there is no grace period.
Your options when facing an appraisal gap include: covering it with savings or a gift from family, getting a second appraisal from a different lender (results may vary), negotiating a price reduction with the developer (rare but possible in soft markets), or seeking a private second mortgage to bridge the gap (expensive but sometimes the only option). In the worst case, if you cannot close and the contract doesn't contain an appraisal condition, you may forfeit your deposit. Always have a contingency fund when buying pre-construction.
When a lender appraises your unit at closing and it comes in below the contract price, the gap between contract price and appraised value is the "appraisal gap." The lender will only mortgage up to 80% (or less) of the appraised value, so you're on the hook for the rest.
You have several options: (1) cover the gap with additional cash from savings, (2) negotiate the price down with the developer (rare but possible), (3) get a second opinion appraisal, (4) find an alternative lender who will accept the appraised value, or (5) walk away if the contract allows rescission.
They became common after 2022 when pre-construction units purchased during the market peak began closing in a lower market environment. Some GTA condo closings saw appraisal gaps of $100,000–$300,000.
Some assignment insurance products exist but they're limited in Canada. The best protection is buying within your budget and having a financial buffer available at closing. Some purchase contracts include appraisal condition clauses — review yours carefully.
Explore current rates from 16+ Canadian lenders, or read our guides to understand your options.