National Post (National Edition)
Two years from retirement, widow wonders whether she can afford to buy a house
SOLUTION: SELL INVESTMENTS TO BUY THE HOUSE, USE HOUSE FOR COLLATERAL FOR INVESTMENT LOAN, DEDUCT INTEREST
In Ontario, a woman we’ll call Margaret, 58, was recently widowed. She has two children in their early 30s with independent lives. She has a civil service job that pays $9,720 a month before tax plus a $560 Canada Pension Plan Survivor’s Benefit and $1,000 of non-registered investment income. That’s a total of $11,280. Taxes and workplace deductions reduce her income to $6,437 a month. Secure for now, she worries that her retirement, which she expects to begin at age 60, will be financially insecure.
“I am renting now at $2,000 a month, but I would like to buy a home in my area,” Margaret says. “I would then be a retiree with debt. Will taking on a mortgage cripple my retirement?”
Family Finance asked Guil Perreault, head of G. Perreault Financial Inc. in Winnipeg, to work with Margaret.
A mortgage would not be her only debt, Perreault says. She has an outstanding balance on her car loan and a pension buyback payment option that would cost her $15,408. She can pay these off with cash she holds from the settlement of her late husband’s estate. The question of whether it is beneficial to buy a home depends in part on how these obligations work out, Perreault says.