should I cash in policies to reduce mortgage?

[zookeeper]

Hello

I'm a single mum to three young dcs - my only assets are my home (worth about £180k) with a £19k mortgage and two policies; a scottish friendly bond with a current surrender value of £3070 into which I pay £25 a month and a children's mutual bond with a surrender value of £2240 into which I pay £17 a month.

The first matures in 2016 and the second in 2019.

The surrender values are only marginally higher than they were this time last year.

My income is low but boosted by tax credits which will not last for ever. I have no debts. And no pension ...

Do you think it would be a good idea to cash them in and put the money into the mortgage?

All thoughts welcome; I have only just sorted out finances with my ex after a lot of wrangling and feel uncertain and rather apprehensive about the future.

I am 46.

[CogitoErgoSometimes]

It's an 'it depends' answer :) Is your main apprehension that you won't be able to keep up the mortgage repayments and you'll have to sell up? Is it more immediate i.e the mortgage payments (and other regular outgoings) are too high relative to your income?

The bonds don't sound like they're generating much interest so cashing up might be a good idea, even if you only convert them to something paying more interest like a Cash ISA or a bond. If the interest you're paying on the remaining mortgage is more than the interest you'd get on your savings, and if there are no penalty charges for early redemption, it could make sense to pay a chunk off the balance. If you can stop paying the contributions to the bonds and let them run to term without cashing up, you could potentially overpay your mortgage by £42/month ... that's another option. You could start a pension with the same sum or even just build up your regular savings.

Life being what it is, it's always a good move to have a bit of ready cash that you can get your hands on in an emergency rather than giving it all to the mortgage company. Having once had to find £2000 at short notice to replace a central heating boiler, I'd have been in trouble if it had all been tied up in the house.

Good luck. HTH

[zookeeper]

Thanks Cog - that's given me something to think about