A 10/1 ARM is a type of adjustable-rate mortgage that offers a fixed interest rate for the first 10 years, followed by annual rate adjustments. It provides the security of long-term fixed payments upfront, combined with the potential for lower initial rates than a traditional 30-year fixed loan. In this blog, we’ll break down how a 10/1 ARM works, when it makes sense, and the pros and cons.

Understanding how a 10/1 ARM works

The term 10/1 ARM stands for a 10-year adjustable-rate mortgage with one-year rate adjustments after the fixed period ends. Like other hybrid ARMs, it begins with a set period of fixed interest — 10 years, in this case — before the loan becomes adjustable.

Here’s how it works in practice:

• Fixed period: For the first 10 years, your interest rate and monthly payments remain the same.
• Adjustment period: Starting in year 11, your interest rate adjusts every 12 months based on market conditions.

Adjustments are typically based on a financial index (like the Secured Overnight Financing Rate [SOFR]) plus a margin set by your lender. For instance, if, at your adjustment, the SOFR is 4% and your margin is 2.75%, your new rate would be 6.75%.

Most 10/1 ARMs include rate caps to protect you from drastic changes:

• Initial cap: Limits how much your rate can increase at the first adjustment (e.g., 2%)
• Periodic cap: Caps changes during each subsequent annual adjustment (e.g., 2%)
• Lifetime cap: Limits the total increase over the life of the loan (e.g., 5%)

Why choose a 10/1 ARM?

The primary appeal of a 10/1 ARM is the extended fixed-rate period, which provides more stability than shorter-term ARMs (like a 5/6 or 7/1 ARM) while still offering a lower starting rate than a 30-year fixed loan.

Here’s why some borrowers gravitate toward this option:

• You get 10 full years of predictable monthly payments.
• The initial interest rate is often 0.5–1% lower than a 30-year fixed mortgage.
• If you expect to move, sell, or refinance within 10 years, you may never face an adjustment.
• It’s ideal for buyers who want to lock in a lower rate now but don’t need the full 30-year fixed-term security.

In short, a 10/1 ARM can offer a great balance of short-term savings and long-term flexibility.

The risks of a 10/1 ARM

Like any adjustable-rate mortgage, a 10/1 ARM comes with potential payment uncertainty after the fixed-rate period ends. That could lead to higher monthly costs in the future if interest rates rise.

Risks include:

• Payment increases: Once the 10-year fixed period ends, your rate can go up annually.
• Market unpredictability: Interest rates could be much higher a decade from now.
• Refinancing limitations: If your income drops or your home loses value, you might not qualify to refinance before the adjustment period begins.
• Lifetime cap shock: Even though increases are capped, the lifetime maximum could still significantly raise your monthly payment.

That said, the 10-year fixed period gives you plenty of time to plan ahead, making this a lower-risk ARM option than shorter hybrids.

How a 10/1 ARM compares to other mortgage types

A 10/1 ARM offers the longest fixed period of any hybrid ARM, which makes it one of the least volatile adjustable-rate options on the market. For those who want the best of both worlds — lower rates now with a decade of stability — it’s a smart option.

Who should consider a 10/1 ARM?

A 10/1 ARM is ideal for borrowers who:

• Plan to move, sell, or refinance within the next 10 years
• Expect income growth or a major life event (e.g., retirement, relocation) in the next decade
• Want lower initial mortgage payments without the short timeline of a 5- or 7-year ARM
• Are buying a starter home or investment property they don’t intend to hold long-term

For example, if you’re in your 30s and expect to upgrade homes by your early 40s, a 10/1 ARM can save you thousands without exposing you to near-term rate hikes.

Questions to ask before choosing a 10/1 ARM

Before locking in a 10/1 ARM, make sure to ask your lender:

• What is the initial fixed interest rate compared to current fixed-rate loans?
• What index and margin will be used to determine rate changes?
• What are the initial, periodic, and lifetime caps on rate adjustments?
• What is the maximum monthly payment I could face under the lifetime cap?
• What are my options for refinancing before the 10-year period ends?

Use an adjustable-rate mortgage calculator to forecast both the initial payment and a worst-case scenario payment under the lifetime cap. That way, you can plan with confidence.

Pros and cons of a 10/1 ARM

Pros:

• Long 10-year fixed-rate period
• Lower starting rate than a 30-year fixed mortgage
• Ideal for short- to mid-term homeowners
• Can increase borrowing power due to lower early payments

Cons:

• Risk of rate increases after 10 years
• Possible payment shock if interest rates rise significantly
• Not suitable for buyers who want full 30-year payment stability
• Ability to refinance in the future is not guaranteed

Is a 10/1 ARM right for you?

The 10/1 ARM is a powerful mortgage tool for homeowners who want lower payments now and a solid decade of predictability. It combines the cost-saving benefits of adjustable-rate loans with the stability of a long fixed period, making it an excellent middle-ground option.

That said, it’s not for everyone. If you’re planning to stay in your home for more than 10 years and want the security of a consistent monthly payment, a 30-year fixed mortgage might be a better fit. But if you’re financially flexible, willing to refinance, or planning a move in the next decade, a 10/1 ARM could help you save thousands upfront.

Want to see today’s 10/1 ARM rates? Compare top adjustable-rate mortgage lenders now at Rates.Now and find the best rate for your future.

‍