A Suze Orman exclusive

During his diss of fixed rate mortgages, Chairman Greenspan spoke about how homeowners spend too much on "insurance" by opting for a fixed rate. He's referring to the fact that the interest rate on a fixed mortgage is going to be higher than the rate on an adjustable.In Green-speak, the one-percentage-point difference between a 30-year fixed and a 5/1 Hybrid ARM is the "insurance" you pay to never have to worry about your ARM payments getting raised. And he says that's too much to pay for the insurance.

Well thanks for pointing out the obvious! Of course that's too much to pay for insurance. Name me one type of insurance we don't pay too much for? I bet we all think we overpay for our car insurance, our health insurance, our home insurance. That is, until a catastrophe strikes and we are so grateful we have the insurance to protect us from huge losses. I'd love for insurance to be a bargain, but I happily pay whatever I need to for the protection from catastrophes I cannot fathom paying for myself.

It is exactly the same with the insurance Mr. Greenspan talked about. With a fixed rate mortgage you are buying protection against your payment ever rising. And I think that is great insurance to have if you plan on staying in your house forever.

Think about it for a minute. You're in the home you plan to live in for the rest of your life. Why do you want the anxiety of an ARM that can send your payments higher and higher every year, when right now you can lock in a 30-year fixed rate mortgage for 5.5 percent. Five point five, my friends! My goodness, that is beyond great. Ten years ago you'd be lucky to get the same loan for under 8 percent.

And there's plenty you can do to make your fixed rate even more of a steal. First, please see if you can handle the payments on a 15-year mortgage. If it's manageable, you will save oodles of money on lower total-interest payments. Let's take our old friend, the $150,000 mortgage. Remember that on the 30-year at 5.5 percent, the monthly payment is $851. A 15-year mortgage for $150,000 carries a current rate of 4.7, but because of your shorter time frame the monthly cost is $1,163. However, your total interest payments on the 15-year will be $59,319, compared to $156,208 for the 30-year. I don't care how many zeros are in your bank account; that's nearly $100,000 less! Just as important, if you're a 40-something, you will have the mortgage paid off before you hit retirement. That's going to make your retirement years truly relaxing.

Now if that 15-year monthly payment is too steep, try another of my favorite mortgage tactics. Send in one extra payment a year. Just one. And you will shave five years off of a 30-year mortgage, again saving a bucketload in interest. Don't think you can come up with the extra payment? Come on, I'll make it impossibly easy for you. Divide your monthly payment by 12. Then send in that extra amount every month with your regular payment. Depending on your mortgage, we're probably talking about less than $100 a month for many of you. I think you can find $25 a week to save for this extra-payment strategy.

This strategy is the same as the bi-weekly mortgage offered by lenders. (You are making 13 payments a year with my plan; a bi-weekly requires 26 payments a year, which is the same thing as 13 monthly payments.) I am not a fan of bi-weekly mortgages. Lenders charge $300 or so to set them up, and sometimes they tack on an extra-payment "fee" of $5 or so a month. That's $360 the first year, and then $60 or so every year after, for something you can do yourself for free.

The idea with either the 15-year or the accelerated payment strategy is to get your mortgage paid off as soon as possible. As I explained in my previous column, Popular Stupid Tax Strategies, the notion of keeping your mortgage so you can get the interest deduction on your taxes is incredibly stupid thinking. If you are in a home you intend to stay in, give yourself total security as fast as possible: no mortgage payment to worry about.

It's always a smart move, and could be even more important in the future, thanks to another Wizard of Washington opinion. In the same week he did his ARM twisting, Chairman Greenspan also announced that he thinks the way to deal with our huge federal budget deficit is to consider cutting Social Security benefits. (Don't get me started on why this makes me crazy; anyone born after 1960 has already seen the age they can receive full benefits pushed up to 67 from the standard 65. But I'll save this for another column.)

While there is going to be much political wrangling over this idea in the coming years, I can guarantee you one thing: those of you in your 20s and 30s, and probably even those in your 40s, are going to see your Social Security benefits trimmed somewhere, somehow, sometime. That makes it all the more important to get your financial house in order well before you near retirement. At the top of your list can be the goal to have the mortgage paid off before you reach 62.

Let's not let Alan Greenspan twist our ARMs into financial submission. Let's make sure we're prepared for the impending Social Security arm wrestling match by building up our own financial muscle, instead of having to depend on those who just possibly might not have our best financial interests at heart. That's the kind of thing we're going to be learning about right here online over the next year, which is something we should all be Yahooing about, big time.