A 10-year ARM has an introductory interest rate for the first 10 years. Once thats over, the rate adjusts every six months.
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A 10-year adjustable-rate mortgage offers a fixed rate for the first 10 years of the loan. After that, the interest rate resets every six months. Many homeowners opt to refinance or sell their property before the rate starts to change. So why bother with an adjustable-rate mortgage at all?.
Well, because during that initial fixed-rate period, ARMs often offer significantly lower interest rates than fixed-rate mortgages. With a 10-year ARM, thats a decades worth of a teaser rate. Heres what to consider if youre thinking about a 10-year adjustable-rate mortgage.
One common type of hybrid mortgage is the 10/1 ARM, which is an adjustable-rate mortgage. This type of mortgage has features of both fixed-rate and adjustable-rate loans. The “10/1” means that the interest rate on the loan stays the same for the first 10 years and then changes every year for the last 20 years of a typical 30-year term.
10/1 ARMs let people buy homes with lower interest rates than fixed-rate mortgages while still having stable payments for the first ten years. Rates and monthly payments may change after the 10 years are over, though. There are pros and cons to this one-of-a-kind structure that depend on your goals and financial situation.
How Does a 10/1 ARM Work?
As long as you make payments on a 10/1 ARM every month for 120 payments, the interest rate will stay the same. This lets you plan your budget better because you know how much your mortgage will cost for a long time.
After 10 years, an index rate and margin are used to recalculate your interest annually. The index your ARM follows can be the 1-year Treasury rate, LIBOR, or another common benchmark. Your margin is a set percentage above the index, such as 2.25%.
As an example:
Initial Interest Rate: 4%
Margin: 2.25%
Current 1-Year Treasury Index: 2%
New Interest Rate: 2% + 2.25% = 4.25%
If the index rate goes up, your new interest rate and monthly payment will also go up. If rates fall, your payment could potentially decrease.
ARM contracts include rate caps that limit interest increases. A typical cap structure is 2/2/5:
- 2% – Max rate increase at first adjustment
- 2% – Max for subsequent adjustments
- 5% – Lifetime cap above starting rate
This protects you from extreme payment spikes.
10/1 ARM Interest Rates
The biggest appeal of 10/1 ARMs is the lower starting interest rate compared to 30-year fixed-rate mortgages. As of March 2025, average nationwide rates were:
- 10/1 ARM – 4.5%
- 30-Year Fixed – 5.25%
This 0.75% rate gap means over $100 in monthly savings on a $300,000 loan. You benefit from lower payments in the near-term before any adjustments occur.
However, keep in mind rates and payments can rise significantly after year 10 if market rates increase. Run mortgage calculations to see various scenarios.
Pros and Cons of 10/1 ARMs
| Pros | Cons |
|---|---|
| Lower starting interest rate | Rates/payments can increase |
| Increased borrowing power | Complex terms |
| Payments could later decrease | Risk of negative equity |
| Rate caps provide protection | Stricter qualification |
A 10/1 ARM makes sense for some homebuyers but not others:
Good Fit: You plan to move within 10 years. You’ll benefit from lower initial rates without facing uncertainty later. First-time buyers who expect rising incomes often prefer 10/1 ARMs.
Poor Fit: You want to stay in the home long-term. Opt for a fixed-rate mortgage to lock in stable payments for the full term.
Run the numbers to see if a 10/1 ARM meets your budget and goals.
10/1 ARM vs. Other Loan Types
10/1 ARM vs. 5/1 ARM – The 5/1 ARM is similar but with a shorter 5 year fixed period before annual adjustments start. This brings slightly lower rates but less long-term stability.
10/1 ARM vs. 30-Year Fixed – The fixed-rate mortgage maintains the same rate for 30 years but typically starts higher than a 10/1 ARM. Choose based on your timeline.
10/1 ARM vs. 7/1 or 10/6 ARM – These have the same 10 year fixed start but adjust every 6 months or 7 years afterward instead of annually. More frequent adjustments mean possibly faster rate increases.
Tips for Getting a 10/1 ARM
Here are a few tips to secure the best 10/1 ARM loan:
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Shop around – Compare multiple lender quotes to find the lowest rates and best terms. Even small rate differences can save thousands.
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Mind the indexes – Understand which indexes lenders use and how volatile they’ve been historically. SOFR is a newer index that may be less prone to swings.
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Check rate caps – The tighter the rate caps, the more your maximum payment is limited if rates rise. Loose caps put you more at risk.
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Consider points – You can pay points upfront to buy down your starting rate. This increases near-term savings but can be costly long-term if you move before recouping the upfront cost.
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Ask about discounts – Many lenders offer discounts for setting up autopay or having other accounts with them. Inquire about any deals that can lower your rate.
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Get qualified – These loans have stricter approval guidelines than fixed-rate mortgages. You’ll likely need good credit, income, and cash reserves to qualify.
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Have a backup plan – If rates spike down the road, have a plan to refinance or otherwise handle higher payments. Budget carefully.
Is a 10/1 ARM Right for You?
A 10/1 adjustable-rate mortgage can provide big savings in the first 10 years, but also introduces uncertainty after rates adjust annually starting in year 11. This unique loan structure suits some homebuyer situations better than others.
If you plan on moving within the next decade, a 10/1 ARM allows you to take advantage of lower initial rates without worrying about future fluctuations. You can reap the rewards during your timeline and move on before the adjustable period begins.
However, if you want to stay in your home long-term, the lower starting rate may not outweigh the risk of higher payments down the road. Going with a fixed-rate mortgage ensures completely stable payments for the full 30 years.
Think carefully about your goals, time horizon, and risk tolerance before deciding if a 10/1 ARM fits your needs. But shop around, as the savings could be substantial if you stand to benefit from lower rates at the start.
How does a 10-year adjustable-rate mortgage work?
A 10-year adjustable-rate mortgage is a hybrid mortgage because the rate stays the same for 10 years before it starts to change. Like fixed-rate mortgages, most ARMs have terms of 30 years. This means that after 10 years, the rate will usually change again after 20 years.
During that adjustable period, your 10-year ARMs interest rate will rise or fall depending on prevailing mortgage interest rates. ARM rates are made up of two parts: the index, which can go up or down, and the margin, which stays the same. Lenders add the index to the margin to determine adjustable mortgage rates.
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When you are looking into 10-year ARMs, youll see that lenders offer not only different interest rates but also differing parameters for how the loan will work. Its not as if anything can happen once the introductory period is up. Instead, there are caps that show you how much your interest rate might change. These are often presented as sets of three numbers, like 2/2/5. These represent the three caps.
- Initial cap. When your interest rate changes for the first time, the first number tells you how high it could go. Since it’s a 2 in the 2/2/5 example, the first change can’t be more than 2 percentage points. If your interest rate was 4% at the start, the highest it could go is 6% after your first change.
- Subsequent/periodic cap. This cap goes by different names, but the middle number tells you how much your interest rate could change each time it changes after the first reset. If you have a 2/2/5 ARM, your rate can go up by up to 25% every six months. Continuing with the example, let’s say you’re at 6%. From there, the highest point you can reach is 8%.
- Lifetime cap. The last number tells you how much more your interest rate could go up than the first rate. Five percentage points are pretty common. In our example from February 5, 2022, if you started with a 4% introductory rate, your lifetime cap would be 9%.
Knowing these different caps can help you understand what could happen if you end up keeping your 10-year ARM beyond that initial 10 years. You can also ask adjustable-rate mortgage lenders to do the math for you and give you actual numbers for what your mortgage payment could be at different interest rates.
Depending on prevailing rates, your interest rate also could adjust downward. This actually can put ARM borrowers in the adjustable period at an advantage, because in a falling rates environment they can get an interest rate decrease without having to refinance. However, lenders may set a floor limiting how much your interest rate can fall if rates are going down.
If youre looking for a 10/1 ARM, you might not find one. In 2020 and 2021, the benchmark interest rate used to determine adjustable mortgage rates changed from Libor to SOFR. From a borrowers perspective, the biggest difference is that SOFR ARMs adjust twice a year. Thats why youll sometimes see /6, indicating the rate adjusts every six months following the introductory term. The previous index fluctuated less, so Libor ARMs only reset once a year — that was the /1.
What are the disadvantages of a 10-year ARM?
Adjustable-rate mortgages, including the 10-year ARM, arent a fit for every home buyer. Here are some of the drawbacks of 10-year ARMs.
Less predictability. Even knowing the caps and the floor, you dont know exactly what your monthly mortgage payment will be after the introductory period ends. You might have decided during that 10 years that you absolutely love the house and no longer want to move — and if your budget cant accommodate the rate increases, that could be a problem.
Expensive to leave. If youre planning to move anyway, no big deal. But if you need to refinance to a fixed-rate loan or into a new ARM, youll have to factor in the cost of refinancing. Refinance closing costs can come to 2% to 5% of the loan costs, which could potentially cancel out the savings from your introductory rate.
Higher introductory rates than 5-year ARMs. While a 10-year ARM should still get you a lower intro rate than a fixed-rate mortgage, you wont see as big a difference as you would if you got an ARM with a shorter introductory period. A 5-year adjustable-rate mortgage will often get you the lowest introductory rate. Depending on the lender and on the interest rate climate, 10-year ARM rates might not be dramatically lower than some fixed-rate loan options.
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FAQ
What is a 10/1 arm?
Accessed on April 24, 2025. A 10/1 ARM is a common type of 30-year adjustable rate mortgage. Read more to find out if this is the best loan option for you.
How long does a 10/1 arm last?
A 10/1 ARM has a fixed rate for 10 years (the 10 in “10/1”). The interest rate will then change once a year for the rest of the loan’s term (the “1” in “10/1”). Your monthly mortgage payment will change if interest rates change (go up or down) when it’s time to reset the loan’s rate.
Is a 10/1 arm a good choice?
The interest rate on a 10/1 ARM is composed of a margin rate and an index rate, which can cause it to rise or fall depending on market trends. People who want to sell their home in the first 10 years of the loan may want to get a 10/1 ARM. What is a 10/1 ARM? A 10/1 adjustable-rate mortgage (ARM) is a type of 30-year mortgage.
What is the difference between a 10/6 arm and 10/1 arm?
For the first ten years of your mortgage, a 10/6 ARM and 10/1 ARM function the same. Both have a 10-year period where you pay a fixed monthly payment. However, once the fixed-rate term is over, there is a difference in how often your interest rate will adjust.
What is a 10/1 arm mortgage?
A 10/1 ARM is a hybrid mortgage — that is, a mortgage with a fixed and a variable period. For the first 10 years, the borrower pays the same interest rate on the loan. After that, the rate can fall or rise, depending on interest rate trends. ARM interest rates are composed of two parts.
What is a 10 year arm?
A 10-year ARM represents the length of time that your initial interest rate stays the same. In this case, your ARM stays the same for the first 10 years. After 10 years, you enter into an adjustment period and your interest rate can increase or decrease based on the current index rate and the terms of your loan.
Is a 10-year ARM a good idea?
If you plan to sell your home or pay off your mortgage within 10 years, then a 10-year ARM may be right for you. Rates on ARMs are usually lower than rates on comparable fixed-rate mortgages, so their monthly mortgage payments are lower.
What happens at the end of a 10-year ARM?
After the introductory fixed-rate period ends, the rate will be recalculated on a recurring schedule for the remainder of the loan term. With a 10/1 ARM, that initial fixed-rate period will last for 10 years. Rate adjustments will then happen annually.
What is the difference between a 10-year ARM and a 30-year mortgage?
A 10/1 ARM often has a lower initial interest rate compared to a 30-year fixed-rate mortgage, generally about 0.25 to 0.5 percent less. The initial rate of a 10/1 ARM is typically set below current market rates, which makes it an appealing choice in a high-interest rate environment.
Is a 10-year mortgage a good idea?
Borrowers may prefer a 10-year mortgage to save on total interest paid. This could be a good option for buyers with higher incomes who can afford larger monthly payments with money still left over for savings and other expenses.