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10/1 ARM: Definition And Today’s Rates

5-Minute Read
Published on December 2, 2020

*As of April 12, 2021, Quicken Loans® isn’t offering 10/1 adjustable rate mortgages (ARMs).

You’re ready to buy a home, but like most people you need to finance that purchase with a mortgage. You have plenty of options when looking for that mortgage loan. One that might work depending on your financial situation? The 10/1 ARM.

The 10/1 ARM is what is known as an adjustable rate mortgage, one in which your mortgage rate remains the same for a set period of time before adjusting to a new rate on a predetermined schedule. With the 10/1 ARM, your rate remains the same for the first 10 years of your loan. After the fixed period ends, your rate will adjust once year for the remaining term of your loan.

If you don’t plan on living in your home for more than 10 years? A 10/1 ARM might be right for you.

What Is A 10/1 ARM?

When you’re searching for a mortgage loan, you can choose either a fixed-rate loan – a mortgage in which your interest rate never changes – or an adjustable rate mortgage. A 10/1 ARM belongs to the adjustable rate family of home loans.

Adjustable rate mortgages typically start out with an interest rate that is lower than what you’d get with a standard fixed-rate loan. That rate, though, only remains at this level for a set number of years. After those years pass, the interest rate on an adjustable rate mortgage, or ARM, rises or falls according to a set schedule.

With the 10/1 ARM, your interest rate will remain fixed for 10 years. It will then adjust once a year for the remaining years of your loan. If you take out a 30-year 10/1ARM, your rate will remain fixed for 10 years and then adjust once a year for the remaining 20 years. With a 15-year 10/1 ARM, your rate again remains fixed for the first 10 years before adjusting each year for the remaining five years of your loan.

Because the interest rate on a 10/1 ARM will be low during the first 10 years, this is a good choice if you know you don’t want to live in your new home for more than 10 years.

If you plan on living in your home for longer than 10 years, be careful: there are risks with ARMs. Your interest rate could rise each year after the fixed period. That means your mortgage payment will increase during this time, too. Make sure you can afford any possible increase.

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10/1 ARM Basics

A 10/1 ARM might seem complicated. But these products are relatively simple once you get the basics.


Borrowers turn to ARMs because the initial interest rates that come with these loans are generally lower than what buyers can get from standard fixed-rate loans. Of course, the fixed period doesn’t last forever. After that period ends, the interest rates on these loans adjust, usually increasing.

With a 10/1 ARM, your interest rate will remain fixed for 10 years and will then adjust once every other year until you pay off your loan, sell your home or refinance your mortgage. What your rate adjusts to will depend on whatever economic index it is tied to.

Often, ARM interest rates are tied to the prime rate that banks charge when issuing loans to borrowers with the strongest credit. The interest rates on other ARMs might be tied to LIBOR, which stands for London Interbank Offered Rate. This is the interest rate that banks charge each other for the overseas deposits of U.S. dollars.

These aren't the only economic indices that guide the direction of ARM interest rates, though. Be sure to ask your lender or bank which index it is using when you apply for an ARM.

Monthly Payments

When your interest rate adjusts, your monthly mortgage payment will change, too. If your interest rate goes up, your monthly payment will increase. If it adjusts down, your payment will go down, too.

Make sure, then, that you can afford a higher monthly mortgage payment if you plan on staying in your home longer than 10 years.

Adjustment Interval

Most ARMs, including 10/1 ARMs, come with caps on how much interest rates can rise during their adjustment periods. These caps, though, can vary.

Say your 10/1 ARM comes with what is known as a 5/2/5 cap. Once your ARM enters the adjustment period – the 11th year with a 10/1 ARM – your interest rate can increase by a maximum of 5% points. That's what the first 5 in the 5/2/5 cap arrangement stands for.

Every year after this, your interest rate can adjust a maximum of 2% points. That is where the second 2 in the cap arrangement comes from.

Finally, that last 5 means that your interest rate during the life of your loan can never adjust higher than 5 total percentage points from your initial rate.

10/1 ARM Advantages And Disadvantages

As with any mortgage loan, there are both pros and cons to 10/1 ARMs.


Lower initial interest rate: The biggest benefit of a 10/1 ARM is the lower initial interest rate you’ll receive during the fixed period. These rates are typically lower than what you’d get with a 30-year, fixed-rate loan. As of late 2020, and depending on your credit score, it’s possible to get a 10/1 ARM with an interest rate well under 3%.

Longer fixed-rate period: Unlike other ARMs, the 10/1 ARM comes with a longer fixed-rate period. Many other ARMs come with fixed-rate periods of just five or seven years. The longer fixed period gives homeowners more time to hold onto the mortgage before the rate begins adjusting.


Rate uncertainty: With a fixed-rate loan, you know exactly what your interest rate will be throughout the life of your loan. ARMs – even one with a longer fixed period such as a 10/1 ARM – are different: After the fixed period ends, your rate will adjust. This could mean a higher mortgage payment if your rate rises. You need to be prepared for that uncertainty.

The pressure to sell or refinance: Many homeowners take out ARMs with the goal of either selling their home or refinancing to a fixed-rate mortgage before the fixed period of their ARMs expire. That’s a good plan, but it might not always work. You might try to sell your home but not find any good offers. You might want to refinance, but maybe your income levels have dropped, and you can’t get approved, or maybe you don’t have enough equity in your home to close a refinance. When taking out a 10/1 ARM you need to be prepared in case your plans to sell or refinance fall through.

Today’s 10/1 ARM Rates

There are plenty of places to find current mortgage interest rates, such as the Mortgage Bankers Association, which lists them at the bottom of their home page; the Freddie Mac Primary Mortgage Market Survey, which updates them once a week; and the rates page offered by Quicken Loans®.

These and other sources, though, don’t usually list the specific average interest rate for 10/1 ARMs. If you want those rates, your best bet is to speak with a mortgage expert – such as the ones at Quicken Loans – for a quote based on your credit and financial information.

Should You Get A 10/1 ARM?

A 10/1 ARM makes the most sense if you plan to sell your home or refinance your mortgage before the 10-year fixed period ends. If you do this, you can take advantage of the low initial interest rate that comes with an ARM without worrying about your rate rising once the fixed period ends.

You’ll need a tolerance for risk, though. Even if you plan to sell or refinance before the fixed period ends, there’s no guarantee that you’ll be able to accomplish these tasks before your rate enters its adjustment phase.

If you are interested in learning more about 10/1 ARMs or any other mortgage product, talk to a mortgage expert at Quicken Loans today.

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Call our Home Loans Experts at (800) 251-9080 to begin your mortgage application, or apply online to review your loan options.

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