Is it possible to tear down my house and build a new one if I still owe on it? I have about $32k equity on a $150k house. Half the houses on my street are owned by speculators or real estate companies, and are being razed and replaced by $450k - $550k homes. Other tear downs on adjacent streets are selling for $600k - $850k because the lots are larger. This is a very desirable area in one of the best school districts, and is still booming despite the generally poor housing market. It would cost about $200k to tear it down and rebuild.