A Suze Orman exclusive

Step 2: HOW NOT TO MORTGAGE YOUR FUTURE
Mortgages are a "good" source of debt, in that you are ultimately building equity in a home. But you should still make every effort to pay it off fast to reduce your interest costs.

With interest rates near their historical lows - a 30-year fixed runs about 6 percent right now - I know many of you have either bought your first home, refinanced to a lower mortgage or perhaps traded up to a new home. That's great stuff, but I want you to consider that even at these super-low rates you're still going to shell out massive amounts in interest over the life of a loan.

So let's walk through some money-saving tips.

First, shop smart for the right mortgage. Thirty-year fixed-rate mortgages are by far the most popular type of mortgage, but what's odd is that the average homeowner is spending just five or six years in a home before refinancing or moving. If that describes you, then I'd suggest checking out a Hybrid Adjustable Rate Mortgage (ARM) such as a 7/1. What this means is that you get in at a fixed rate for the first seven years before the rate can be adjusted. Right now the average 7/1 charges a 4.7 percent interest rate, compared to 5.7 percent for a 30-year fixed. On a $150,000 mortgage that can mean $92 a month in savings, or nearly $8,000 over the first seven years.

And by all means, if for some reason you didn't jump on the refinancing bandwagon the last few years, please check into refinancing if your current mortgage is above 7 percent.

Next, if you're in a home you intend to stay in, let's get serious about paying off the mortgage. No bank robberies will be necessary. If you can manage just one extra mortgage payment a year you can cut a 30-year mortgage at 6 percent down to about 25 years and a 15 year mortgage will be paid off in 13 years. That translates into huge savings on the interest payments. And I mean huge: you'll avoid paying more than $35,000 in interest on the 30-year.

The most painless way to pull this off is to divide your current monthly payment by 12 and then send in that amount each month along with the regular amount. If your monthly mortgage is $1000 we're talking about an extra $83 bucks a month (hmmm ... remember that latte reduction idea?).

And please don't get tempted by the bi-weekly mortgages lenders love to push. They cost about $300 to set up and you can be hit with a $5 service fee each month. That's just silly as far as I see it, since sending in one extra payment a year is the exact same thing as having a bi-weekly. (Here's the math: There are 52 weeks in a year; so a bi-weekly comes to 26 payments. That's the same as 13 monthly payments.)

Checklist:
- Consider Hybrid ARMS
- Look into Refinancing if your current mortgage rate is 7 percent or higher. Use the Refinance Calculator to compute your savings.
- Commit to one extra payment a year and shave thousands in interest costs. Use the Extra Payment calculator on Yahoo! Finance Mortgage Center.

Step 3: Beware of Debt Consolidators
It's virtually impossible to not see ads just about everywhere to consolidate your debt and eliminate all your money worries. I wish. Many of these so-called services are scams where they take your money and don't provide any assistance. So the first thing is to make sure you work with a consolidator that is a member of the National Consumer Credit Counseling Service. But also understand that what many of the services do is negotiate with your lenders and credit card companies for you to pay just a portion of your bill. That might sound great, but it can be a huge problem down the line. If you only agree to pay off part of your debt your credit record is going to show that you are a lousy credit risk. Good luck getting any credit or loans in the future. A better tact: work with your lender directly to come up with a plan so you can eventually pay off the entire amount owed.

Checklist:
- Get debt help from the National Consumer Credit Counseling Service