Another option is to sell the house and buy a different house that better meets your current needs. We did this nearly 20 years ago and not only got a better house, but also a better neighborhood.

Have you read the threads on this forum about the current new construction market? You'll find material shortages and delays, lack of experienced trades people and crews, high prices, etc. You'll need more than "some cash" to build new.

We bought a small bungalow to tear down and build new. We bought the home with a regular mortgage then worked with a designer and a builder for a year to figure out our plan. We rented the house out during that year. Then when we were ready to build we refinanced with a construction mortgage which included money to build the new house.

It really depends on your current house. Our old house was in a great spot but tue house itself was too good to be torn down. As a result it made more sense to buy a different lot with a house that wasn’t good and tear that down. We would have never recouped the cost of the rebuild on our first lot. But for this one the lot was basically lot value so worked out well.

You need to do very careful research before demolition, as you may have very valuable grandfathered rule exceptions that will evaporate when the original house is removed.

When the remodel is going to cost half the value of the existing house, teardown/build new makes more sense. We did that 20 years ago. An all-new home will appraise for more than a half-new, and you'll like it better, too. You might need to wait until construction costs recalibrate though. Right now, I'd think someone might be buying old houses just to repurpose the *lumber* --

You need to make sure the bank will go along with this. They may want you to pay off the mortgage before your tear down. The house is their collateral. Most banks in my area, would never agree to that.

The guy I bought my condo from tore down two houses with mortgages in order to build 5 units. What's the bank gonna do?

Ask for immediate payment?

Accuse you of mortgage fraud if you tear down without permission?

I suppose foreclosure or any of that isn't really in their best interest but it would seem to be a slightly dangerous thing to do...

We used to get threatening letters from a bank when we wouldn't let them inspect after some insurance repairs. I did tell my wife basically - "What's the bank gonna do?" but they did threaten to make the loan due immediately and used the foreclosure scare tactic.

The repairs were like $10k, the note about $180k, the house value about $1M.

The guy I bought my condo from tore down two houses with mortgages in order to build 5 units. What's the bank gonna do?

I act for private mortgage lenders in Ontario, Canada. We would immediately exercise the "power of sale" provision in the mortgage and obtain possession in 6 mos. to 2 years. Those condos are then ours to sell to recoup all interest, capital, costs and penalties.

On the other hand, when we're told upfront about demolition or major renovation, we sometimes go ahead based on the land value, location, experience of the borrowers. That's why we're called "alternative" or "shadow" lenders.

When we've torn down old homes to infill, the lenders were explicitly told that that was what was to happen. As for doing it "on the sly", our municipality (and I would expect others) notify lien and mortgage holders of any new building/demolition applications.

Worth I agree. Hence why we converted our mortgage and did it all on up and up.

(not a pro) When we did a major addition (~1100sq ft) and full remodel (kitchen + 4.5 bathrooms) many years ago, one of our first steps (after figuring out our budget) was to look at homes in our neighborhood that were approximately what we thought our resulting value would be. We also compared our potential resulting value to the current value + cost of reno/addition, and looked at the amortization schedules for our current loan and potential refi. Construction costs were nowhere near what they are now, and due to our love for our block and neighbors, we went ahead with the addition/reno.

I'd take a close look at what's available in your neighborhood to buy as is, then do your comparisons for an addition and a full tear down. Per advice above, look into how a new build will affect your taxes and other things vs. an addition (our property taxes here are high, and age of original building is a factor, with older homes being less, in general.) Also in my area, a whole new build requires an indoor sprinkler system, whereas an addition less than 3500sq ft doesn't.

Other things to consider: remodels can often cost more / sq ft than new builds, because you're dealing with existing constraints (foundation, plumbing, etc.) and occasional surprises. And when you're done with an addition, you still have an old foundation / basement vs something new with possibly higher ceilings. If there are large trees anywhere near where construction trucks will be driving, you may lose those due to root damage.