Q&A: Trying to start over

Question: My question is should I buy a house or invest in
RRSP? My husband and I have done all the wrong things since our marriage 30
years ago. We have been discharged from bankruptcy for six years now. We have
no savings and don’t own a home (lost it through our bankruptcy). I have started
saving $200 every two weeks from my pay. I would like to buy a house with no
deposit once I save for the legal expenses. Our rental unit is too small.

Am I making a mistake? Isn’t paying rent of $1,000 a month a waste of money?
I am 49 years old and my husband is 55. Are we too old to be thinking of buying
a house? – P.D.P.

Gordon Pape answers: You have been through some difficult
financial times, no doubt about it. I commend your efforts to start saving again
and to rebuild your assets.

My advice is to forget about buying a house for now. Although it technically
can be done with the use of mortgage insurance, I doubt you would find any company
that would finance a mortgage with no down payment, especially given what has
happened with the subprime market in the U.S.

Instead, I suggest you go the RRSP route for the time being. Based on the figures
you quote, you should be able to contribute $5,200 over the next year ($200
x 26 payments). If you invest the money carefully, within a few years your plan
should be worth well over $20,000.

At that point, you can start thinking seriously about becoming a homeowner.
You can borrow up to $20,000 from the RRSP interest-free to use as a down payment,
under the Home Buyers’ Plan. If your husband can set up an RRSP as well,
he could also borrow $20,000, for a total of $40,000 between you. Assuming you
choose a modest house, you should have no problem obtaining a mortgage at that
stage. Good luck.

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