A 10/1 ARM is an adjustable-rate mortgage with an interest rate that stays fixed for the first 10 years. After that initial period, the rate can adjust once per year.
The 10-year fixed period is longer than the initial period on common 3/1, 5/1 and 7/1 ARMs. That gives you more time before the first possible adjustment, but a 10/1 ARM still carries the possibility of future rate and payment changes.
10/1 ARM Basics
| Feature |
How a 10/1 ARM Works |
| Initial fixed-rate period |
10 years |
| First possible adjustment |
After the initial 10-year period |
| Adjustment frequency |
Once per year after the initial period |
| Adjusted rate |
Generally based on an index plus a margin, subject to the loan terms |
| Rate caps |
Limit how much the interest rate can change at the first adjustment, later adjustments and over the life of the loan |
| Payment |
Principal and interest can change after the initial period if the rate changes |
How a 10/1 ARM Works
The numbers in a 10/1 ARM describe its rate schedule. The “10” refers to the 10-year initial fixed-rate period. The “1” means the rate can adjust once per year after that period ends.
During the first 10 years, the mortgage interest rate does not change. On a standard fully amortizing mortgage, the scheduled principal-and-interest payment is generally stable during that period.
Your total monthly housing payment can still change if expenses such as property taxes, homeowners insurance, mortgage insurance or escrow requirements change.
After year 10, the mortgage enters its adjustable period. The rate can then change annually according to the loan's index, margin, caps and any applicable floor.
What Happens After 10 Years on a 10/1 ARM?
After the initial fixed-rate period ends, the rate is generally recalculated using a market-based index plus the margin specified in the loan agreement.
The index and margin determine the fully indexed rate, subject to the mortgage's rate caps. The index can change with market conditions, while the margin is generally set in the loan agreement and does not change after closing.
If the adjusted interest rate rises, the principal-and-interest payment can increase. The rate may also decrease when the index falls, depending on the mortgage's caps, floor and other terms.
How Rate Caps Work on a 10/1 ARM
Rate caps limit how much an ARM's interest rate can change. They do not prevent adjustments, but they place contractual limits on them.
The CFPB identifies three common types of ARM caps:
- Initial adjustment cap: Limits how much the rate can change when the initial 10-year period ends.
- Subsequent adjustment cap: Limits how much the rate can change at later annual adjustments.
- Lifetime adjustment cap: Limits the total rate change allowed over the life of the mortgage.
Cap structures vary by loan. Review the specific caps in your mortgage disclosures rather than assuming every 10/1 ARM works the same way.
10/1 ARM vs. 5/1 and 7/1 ARMs
The main structural difference among a 5/1, 7/1 and 10/1 ARM is how long the initial interest rate stays fixed. All three can adjust annually once their respective initial periods end.
| ARM Type |
Initial Fixed-Rate Period |
Adjustment Frequency After Initial Period |
| 5/1 ARM |
5 years |
Once per year |
| 7/1 ARM |
7 years |
Once per year |
| 10/1 ARM |
10 years |
Once per year |
A 10/1 ARM delays the first possible adjustment by five years compared with a 5/1 ARM and by three years compared with a 7/1 ARM. The trade-off between those structures also depends on the actual rate, APR, fees, margin and caps available with each loan.
10/1 ARM vs. Fixed-Rate Mortgage
A 10/1 ARM and a fixed-rate mortgage both provide an extended period without interest-rate changes. The difference is what happens later.
A fixed-rate mortgage keeps the same interest rate for the full loan term. A 10/1 ARM keeps its initial rate for 10 years, then allows annual adjustments.
| Feature |
10/1 ARM |
Fixed-Rate Mortgage |
| Initial rate |
Fixed for 10 years |
Fixed |
| Later rate changes |
Can adjust annually after year 10 |
No scheduled rate adjustments |
| Principal-and-interest payment |
Can change after year 10 |
Does not change because of market interest rates |
| Rate caps |
Apply to permitted adjustments |
Not applicable |
Do not assume a 10/1 ARM will start with a lower rate than a fixed-rate mortgage. Actual pricing varies with market conditions, the loan program and your financial profile.
Advantages and Disadvantages of a 10/1 ARM
Potential Advantages
- Long initial period: The interest rate cannot adjust for the first 10 years.
- Later adjustment than shorter ARMs: A 10/1 ARM delays the first possible rate change longer than a 3/1, 5/1 or 7/1 ARM.
- Potential pricing difference: Depending on market conditions, an ARM may be priced differently from a comparable fixed-rate mortgage.
Potential Disadvantages
- Future payment uncertainty: Principal and interest can increase after the initial period if the rate rises.
- Long-term plans can change: Selling or refinancing before the first adjustment is not guaranteed.
- More loan terms to evaluate: The index, margin, caps and any rate floor affect how the mortgage can adjust after year 10.
Who Might Consider a 10/1 ARM?
A 10/1 ARM may be worth comparing if you want a longer initial fixed-rate period but are comfortable with the possibility that the rate could change later.
Your expected timeline can be part of that comparison. You may expect to sell the home, pay off the mortgage or refinance within 10 years, but those plans are not guaranteed.
Consider what would happen if you still had the mortgage when the adjustable period begins. Our ARM risk calculator can illustrate how different rate changes could affect your principal-and-interest payment.
What to Compare Before Choosing a 10/1 ARM
A 10/1 ARM from one lender may have different pricing and adjustment terms than a 10/1 ARM from another. Comparing the full loan terms can give you a clearer picture than looking at the initial rate alone.
Review:
- The initial interest rate and APR
- The 10-year fixed period and first adjustment date
- The index
- The margin
- The initial adjustment cap
- The subsequent adjustment cap
- The lifetime adjustment cap
- Any applicable interest-rate floor
- Points and lender fees
- The maximum possible principal-and-interest payment
For an adjustable-rate loan, the Loan Estimate includes information about how the interest rate can change. Federal disclosure rules also require the maximum possible principal-and-interest payment to account for the loan's adjustment terms and applicable caps.
Bottom Line
A 10/1 ARM has an interest rate that stays fixed for the first 10 years and can adjust once per year afterward. Its longer initial period delays the first possible adjustment compared with shorter ARMs, but it does not eliminate future interest-rate risk.
Compare the actual interest rate, APR, fees, index, margin, caps and potential future payment rather than assuming a 10/1 ARM will cost less than another mortgage option.
Frequently Asked Questions
What Does 10/1 Mean in an ARM?
The “10” means the initial interest rate stays fixed for 10 years. The “1” means the interest rate can adjust once per year after that initial period.
What Happens After 10 Years on a 10/1 ARM?
The interest rate becomes eligible for annual adjustments. The adjusted rate is generally based on the loan's index plus margin, subject to rate caps and any applicable floor.
Can a 10/1 ARM Payment Increase?
Yes. If the interest rate rises after the initial 10-year period, the principal-and-interest payment can increase. Rate caps limit how much the rate can change under the mortgage terms.
Can a 10/1 ARM Rate Decrease?
It can, depending on the loan terms. If the underlying index declines, the adjusted rate may decrease, subject to the mortgage's caps and any applicable rate floor.
Is a 10/1 ARM a 30-Year Mortgage?
A 10/1 describes the interest-rate structure, not the total repayment term. A 10/1 ARM can have a longer loan term, such as 30 years, with the first 10 years fixed and the remaining years subject to annual rate adjustments.
What Is the Difference Between a 10/1 and 7/1 ARM?
A 10/1 ARM keeps its initial rate fixed for 10 years, while a 7/1 ARM keeps its initial rate fixed for seven years. Both can adjust annually after their initial periods end.
Can You Refinance a 10/1 ARM Before It Adjusts?
Yes, if you qualify for a new mortgage. Refinancing replaces the existing loan and can involve closing costs, so future rates, loan terms and costs affect whether refinancing makes financial sense.
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