diff --git a/src/deigma/template.py b/src/deigma/template.py
index c2f9dde..4a37853 100644
--- a/src/deigma/template.py
+++ b/src/deigma/template.py
@@ -67,7 +67,12 @@ def template(
         source = load_template_source(path)
 
     if source is not None:
-        return inline_template(source, serialize=serialize, use_proxy=use_proxy)
+        return inline_template(
+            source,
+            serialize=serialize,
+            use_proxy=use_proxy,
+            _path=str(path) if path else None,
+        )
 
     raise ValueError("Invalid arguments")
 
@@ -87,6 +92,7 @@ def inline_template(
     *,
     serialize: Serialize = DEFAULT_SERIALIZE,
     use_proxy: bool = USE_PROXY,
+    _path: str | None = None,
 ) -> Callable[[type[T]], type[Template]]:
     def decorator(cls: type[T]) -> type[T]:
         config = ConfigDict(arbitrary_types_allowed=True)
@@ -94,10 +100,10 @@ def decorator(cls: type[T]) -> type[T]:
             type(cls.__name__, (cls,), dict(cls.__dict__))
         )
         cls.__is_deigma_template__ = True
-        cls._source = cleandoc(source)
+
+        _src = cleandoc(source)
         engine = Jinja2Engine(serialize=serialize)
-        cls._engine = engine
-        cls._variables = engine.introspect_variables(source)
+        variables = tuple(engine.introspect_variables(_src))
 
         static_fields = set(cls.__annotations__)
         properties = {
@@ -105,15 +111,14 @@ def decorator(cls: type[T]) -> type[T]:
         }
         fields = static_fields | properties
 
-        if not set(cls._variables).issubset(fields):
-            variables = cls._variables
+        if not set(variables).issubset(fields):
             msg = (
                 "Template variables mismatch. Template fields must match variables in source:\n\n"
                 f"fields on type: {fields}, variables in source: {variables}"
             )
 
-            if any(source.endswith(ext) for ext in COMMON_JINJA2_EXTENSIONS):
-                extension = source.split(".")[-1]
+            if any(_src.endswith(ext) for ext in COMMON_JINJA2_EXTENSIONS):
+                extension = _src.split(".")[-1]
                 msg += (
                     f"\n\nHint: 'source' ends with '.{extension}', "
                     "which is a common Jinja2 extension. "
@@ -123,39 +128,83 @@ def decorator(cls: type[T]) -> type[T]:
 
             raise ValueError(msg)
 
-        cls._compiled_template = engine.compile_template(cls._source)
-        cls._type_adapter = TypeAdapter(cls)
+        def _get_adapter(c):
+            ta = getattr(c, "_type_adapter", None)
+            if ta is None:
+                ta = TypeAdapter(c)
+                setattr(c, "_type_adapter", ta)
+            return ta
+
+        def _get_compiled_template(cache):
+            # Optional file mtime check for hot-reload
+            if cache["path"] and os.path.exists(cache["path"]):
+                mtime = os.path.getmtime(cache["path"])
+                if cache["mtime"] != mtime:
+                    cache["src"] = load_template_source(cache["path"])
+                    cache["tmpl"] = None  # force recompile
+                    cache["mtime"] = mtime
+
+            if cache["tmpl"] is None:
+                cache["tmpl"] = cache["engine"].compile_template(cache["src"])
+            return cache["tmpl"]
 
         if use_proxy:
 
-            def __str__(instance):
-                proxied = {
-                    field: getattr(instance._proxy, field) for field in cls._variables
+            def __str__(
+                instance,
+                _cache={
+                    "tmpl": None,
+                    "engine": Jinja2Engine(serialize=serialize),
+                    "src": _src,
+                    "vars": variables,
+                    "path": _path,
+                    "mtime": None,
+                },
+            ):
+                tmpl = _get_compiled_template(_cache)
+
+                if not hasattr(instance, "_proxy"):
+                    adapter = _get_adapter(instance.__class__)
+                    instance._proxy = SerializationProxy.build(instance, adapter)
+
+                proxied = {name: getattr(instance._proxy, name) for name in _cache["vars"]}
+                return tmpl.render(proxied)
+
+        else:
+
+            def __str__(
+                instance,
+                _cache={
+                    "tmpl": None,
+                    "engine": Jinja2Engine(serialize=serialize),
+                    "src": _src,
+                    "vars": variables,
+                    "path": _path,
+                    "mtime": None,
+                },
+            ):
+                tmpl = _get_compiled_template(_cache)
+
+                adapter = _get_adapter(instance.__class__)
+                serialized = adapter.dump_python(instance)
+                rendered_fields = {
+                    name: _render_field_maybe(getattr(instance, name), serialized[name])
+                    for name in _cache["vars"]
                 }
-                return instance._compiled_template.render(proxied)
+                return tmpl.render(rendered_fields)
+
+        cls.__str__ = __str__
 
+        if use_proxy:
             original_init = cls.__init__
 
             def __init__(instance, *args, **kwargs):
                 original_init(instance, *args, **kwargs)
-                instance._proxy = SerializationProxy.build(instance, cls._type_adapter)
+                adapter = _get_adapter(cls)
+                instance._proxy = SerializationProxy.build(instance, adapter)
 
             cls.__init__ = __init__
 
-        else:
-
-            def __str__(instance):
-                serialized = cls._type_adapter.dump_python(instance)
-                rendered_fields = {
-                    field: _render_field_maybe(
-                        getattr(instance, field), serialized[field]
-                    )
-                    for field in cls._variables
-                }
-                return instance._compiled_template.render(rendered_fields)
-
-        cls.__str__ = __str__
-
         return cls
 
     return decorator
diff --git a/tests/benches/test_template_overhead.py b/tests/benches/test_template_overhead.py
new file mode 100644
index 0000000..b2c317f
--- /dev/null
+++ b/tests/benches/test_template_overhead.py
@@ -0,0 +1,238 @@
+"""
+Benchmarks for template compilation and rendering overhead.
+
+These benchmarks measure the overhead introduced by the method-defaults
+approach with lazy compilation and hot-reload features.
+"""
+
+from pathlib import Path
+
+import pytest
+
+from deigma import template
+
+
+# Fixtures
+@pytest.fixture
+def simple_inline_template():
+    """Simple inline template for benchmarks."""
+
+    @template("Hello, {{ name }}!")
+    class HelloTemplate:
+        name: str
+
+    return HelloTemplate
+
+
+@pytest.fixture
+def file_template(tmp_path: Path):
+    """File-backed template for benchmarks."""
+    template_file = tmp_path / "test.jinja2"
+    template_file.write_text("Hello, {{ name }}!")
+
+    @template(path=template_file)
+    class HelloTemplate:
+        name: str
+
+    return HelloTemplate
+
+
+@pytest.fixture
+def complex_inline_template():
+    """More complex template for realistic benchmarks."""
+
+    @template(
+        """
+        {% for item in items %}
+        - {{ item.name }}: {{ item.value }}
+        {% endfor %}
+        """
+    )
+    class ItemListTemplate:
+        items: list[dict]
+
+    return ItemListTemplate
+
+
+# Template Creation Benchmarks
+def test_benchmark_template_definition(benchmark):
+    """Benchmark template class definition (happens once)."""
+
+    def define_template():
+        @template("Hello, {{ name }}!")
+        class HelloTemplate:
+            name: str
+
+        return HelloTemplate
+
+    benchmark(define_template)
+
+
+def test_benchmark_instance_creation(benchmark, simple_inline_template):
+    """Benchmark creating template instance."""
+    benchmark(simple_inline_template, name="World")
+
+
+# First Render (Lazy Compilation) Benchmarks
+def test_benchmark_first_render_inline(benchmark, simple_inline_template):
+    """Benchmark first render of inline template (triggers lazy compilation)."""
+
+    def first_render():
+        instance = simple_inline_template(name="World")
+        return str(instance)
+
+    benchmark(first_render)
+
+
+def test_benchmark_first_render_file(benchmark, file_template):
+    """Benchmark first render of file template (includes mtime check + lazy compilation)."""
+
+    def first_render():
+        instance = file_template(name="World")
+        return str(instance)
+
+    benchmark(first_render)
+
+
+# Subsequent Renders (Cached) Benchmarks
+def test_benchmark_cached_render_inline(benchmark, simple_inline_template):
+    """Benchmark subsequent renders of inline template (uses cached compiled template)."""
+    instance = simple_inline_template(name="World")
+    # First render to populate cache
+    str(instance)
+
+    # Benchmark cached renders
+    benchmark(str, instance)
+
+
+def test_benchmark_cached_render_file(benchmark, file_template):
+    """Benchmark subsequent renders of file template (cached + mtime check)."""
+    instance = file_template(name="World")
+    # First render to populate cache
+    str(instance)
+
+    # Benchmark cached renders (includes mtime check)
+    benchmark(str, instance)
+
+
+# Comparison: Multiple Instances
+def test_benchmark_multiple_instances_inline(benchmark, simple_inline_template):
+    """Benchmark rendering multiple instances of same template (share cache)."""
+
+    def render_multiple():
+        results = []
+        for i in range(10):
+            instance = simple_inline_template(name=f"User{i}")
+            results.append(str(instance))
+        return results
+
+    benchmark(render_multiple)
+
+
+def test_benchmark_multiple_instances_file(benchmark, file_template):
+    """Benchmark rendering multiple instances of file template (share cache + mtime checks)."""
+
+    def render_multiple():
+        results = []
+        for i in range(10):
+            instance = file_template(name=f"User{i}")
+            results.append(str(instance))
+        return results
+
+    benchmark(render_multiple)
+
+
+# Complex Template Benchmarks
+def test_benchmark_complex_template_first_render(benchmark, complex_inline_template):
+    """Benchmark first render of complex template."""
+
+    def first_render():
+        items = [{"name": f"item{i}", "value": i} for i in range(20)]
+        instance = complex_inline_template(items=items)
+        return str(instance)
+
+    benchmark(first_render)
+
+
+def test_benchmark_complex_template_cached_render(benchmark, complex_inline_template):
+    """Benchmark cached render of complex template."""
+    items = [{"name": f"item{i}", "value": i} for i in range(20)]
+    instance = complex_inline_template(items=items)
+    # First render to populate cache
+    str(instance)
+
+    # Benchmark cached renders
+    benchmark(str, instance)
+
+
+# Overhead Measurement: Same Instance Multiple Renders
+def test_benchmark_same_instance_repeated_renders_inline(
+    benchmark, simple_inline_template
+):
+    """Benchmark rendering same instance multiple times (inline template)."""
+    instance = simple_inline_template(name="World")
+
+    def repeated_renders():
+        for _ in range(100):
+            str(instance)
+
+    benchmark(repeated_renders)
+
+
+def test_benchmark_same_instance_repeated_renders_file(benchmark, file_template):
+    """Benchmark rendering same instance multiple times (file template with mtime checks)."""
+    instance = file_template(name="World")
+
+    def repeated_renders():
+        for _ in range(100):
+            str(instance)
+
+    benchmark(repeated_renders)
+
+
+# Mtime Check Overhead
+def test_benchmark_mtime_check_overhead(benchmark, tmp_path: Path):
+    """Benchmark the overhead of mtime checking in file templates."""
+    # Create a file template
+    template_file = tmp_path / "bench.jinja2"
+    template_file.write_text("Value: {{ value }}")
+
+    @template(path=template_file)
+    class BenchTemplate:
+        value: int
+
+    # Warm up cache
+    instance = BenchTemplate(value=42)
+    str(instance)
+
+    # Benchmark renders with mtime check
+    def render_with_mtime_check():
+        return str(instance)
+
+    benchmark(render_with_mtime_check)
+
+
+# Lazy Proxy Building Overhead
+def test_benchmark_lazy_proxy_building(benchmark):
+    """Benchmark lazy proxy building for old instances."""
+
+    @template("{{ value }}")
+    class ValueTemplate:
+        value: int
+
+    # Create instance
+    instance = ValueTemplate(value=42)
+    # Don't render yet
+
+    # Simulate old instance scenario: delete _proxy if it exists
+    # This tests the lazy proxy building path
+    if hasattr(instance, "_proxy"):
+        delattr(instance, "_proxy")
+
+    # Benchmark first render which builds proxy
+    def render_building_proxy():
+        if hasattr(instance, "_proxy"):
+            delattr(instance, "_proxy")
+        return str(instance)
+
+    benchmark(render_building_proxy)
diff --git a/tests/integration/test_hot_reload.py b/tests/integration/test_hot_reload.py
new file mode 100644
index 0000000..a81a176
--- /dev/null
+++ b/tests/integration/test_hot_reload.py
@@ -0,0 +1,100 @@
+"""
+Test for template hot-reload functionality.
+
+This test verifies that templates backed by files automatically reload
+when the file is modified (useful for IPython/Jupyter development).
+"""
+
+import os
+from pathlib import Path
+
+import pytest
+
+from deigma import template
+
+
+def test_file_template_hot_reload(tmp_path: Path):
+    """Test that file-backed templates reload when the file changes."""
+    # Create initial template file
+    template_file = tmp_path / "test.jinja2"
+    template_file.write_text("Hello, {{ name }}!")
+
+    # Define template from file
+    @template(path=template_file)
+    class Greeting:
+        name: str
+
+    # Initial render
+    greeting = Greeting(name="World")
+    assert str(greeting) == "Hello, World!"
+
+    # Modify the file with a future mtime to trigger reload
+    template_file.write_text("Greetings, {{ name }}!")
+    # Set mtime to 1 second in the future to ensure it's detected as modified
+    future_time = os.path.getmtime(template_file) + 1.0
+    os.utime(template_file, (future_time, future_time))
+
+    # Should reload automatically on next render
+    assert str(greeting) == "Greetings, World!"
+
+    # New instance should also get the new template
+    greeting2 = Greeting(name="Python")
+    assert str(greeting2) == "Greetings, Python!"
+
+
+def test_inline_template_no_reload():
+    """Test that inline templates don't have reload behavior."""
+
+    @template("Hello, {{ name }}!")
+    class Greeting:
+        name: str
+
+    greeting = Greeting(name="World")
+    assert str(greeting) == "Hello, World!"
+
+    # Redefining doesn't affect existing instances
+    # (this is expected behavior for inline templates)
+    assert str(greeting) == "Hello, World!"
+
+
+def test_file_template_lazy_compilation(tmp_path: Path):
+    """Test that templates are compiled lazily on first render."""
+    template_file = tmp_path / "test.jinja2"
+    template_file.write_text("Value: {{ value }}")
+
+    # Define template - no compilation should happen yet
+    @template(path=template_file)
+    class ValueTemplate:
+        value: int
+
+    # Create instance - still no compilation
+    instance = ValueTemplate(value=42)
+
+    # First render triggers compilation
+    result = str(instance)
+    assert result == "Value: 42"
+
+    # Subsequent renders use cached compiled template
+    result2 = str(instance)
+    assert result2 == "Value: 42"
+
+
+def test_multiple_instances_share_cache(tmp_path: Path):
+    """Test that multiple instances of the same template share the compiled cache."""
+    template_file = tmp_path / "test.jinja2"
+    template_file.write_text("User: {{ name }}")
+
+    @template(path=template_file)
+    class UserTemplate:
+        name: str
+
+    # Create multiple instances
+    user1 = UserTemplate(name="Alice")
+    user2 = UserTemplate(name="Bob")
+
+    # Both should render correctly
+    assert str(user1) == "User: Alice"
+    assert str(user2) == "User: Bob"
+
+    # They should share the same compiled template cache
+    # (verified by the fact that both work correctly)