Where is our thinking mistake?

Hello,
my girlfriend and I (24 & 26) have been thinking about building a house.
We read a lot about how you should bring 10-20% equity.
Does it make sense to pay about €600 rent per month to save up equity?!
If you could invest the €600 directly into your own house.
That is €7,200 per year that you can invest in your own repayment instead of throwing the money into the landlord's "throat" :)

Where is our thinking mistake?

Equity ~ €10,000 available!
Planned expenses for house & land €200,000 - €230,000

Planned expenses for house & land €200,000 - €230,000

your planned expenses will probably only be enough for the house itself. depending on the size of the house, you can easily add another €100k on top of that (including ancillary costs and land)... i would, in your place, save a bit more equity before you can safely undertake this.

Where is our flaw in reasoning?

In the naive way of thinking!

For 230,000 there is no house with land. If you get a plot of land for free, you still have to add something on top.
The 10,000 goes towards small expenses.
Thus, for example, you need a 110% financing... the bank charges worse conditions for that risk.

Example calculation: For every 100,000 over 20 years x 3.4% is 3,400 € per year, with 350,000 that’s 11,900 €, which makes a monthly interest repayment of rounded 1,000 €. (Sorry, I don’t know the interest rates for 110%, so this is estimated.) That’s all without repayment. 2% repayment would be 7,000 € on the loan amount... Since the repayment is roughly your annual rent, I will spare further comments.

Additional costs must be calculated at 300, possibly each a term life insurance.

Of course, there are other calculations, other repayment options, but in the end it all comes down to the same.

Maybe a banker (or building expert) will take the trouble here to answer your question more precisely.

We have now, for example, found an offer. Of course, we understand that we cannot pay off a house with €600 per month. With just under €200,000 it is about €700 repayment for the loan amortization and about €300 ancillary costs = about €1,000 per month = €12,000 per year. Thus, the €7,200 rental costs could already be factored in, right?

So, I’m logging off here.... my text is lost and you can also read everything in the forum because the same question comes up almost every day. There is a search box at the top right.

Various costs are added to the offer... calculate at least 300,000 (external facilities, tiles, and sockets are expensive, as is the development and possibly incidental construction costs, drainage) Your 10,000 you need for trivial stuff, and the kitchen also has to be financed. Basically, a financing consists of INTEREST AND REPAYMENT, so don’t distort that! It depends on your income (and equity) and is calculated by a financial advisor. He will tell you how much house you can afford.

Interest is paid. In addition, there is repayment. Then there are additional costs (gas, water, electricity, insurance, etc.). Then there are reserves. All of this monthly. Overall, €600 rent quickly dissipates.

So it does not depend on how much rent I currently pay, but how much money you can actually afford monthly ONLY for loan repayment. This determines how high the total costs can be. If it is not enough for the house and land, you add equity. If that is still not enough, you should stay away from it.

I always say: If you still want to pay off the place in this life, you need (at the current interest rate) about €500 monthly repayment per €100,000 loan. Which for €250,000, for example, is €1,250 monthly to the bank.

With ZERO equity, the interest rate increases significantly.