Now is the time to build a new house.  Prices are still as low as they have been in years and you will probably never get the chance to lock in as low of interest rate as right now.  $100 max per square foot will get you a really nice house, may be able to do it for $80-90.  Currently going through a similar situation.  We live in a 160-year old house.  Put new windows, roof, and insulation in it 2 years ago.  Looked into remodeling it completely and it needs a lot.  Probably get $150-200,000 in it real quick and still have an old house.  Plan now is to build new.  Looking at a 3100 sq ft. 2-story, with attic, attached 3-car garage, partially finished basement, and lots of extras, even going to go 2x6's for framing instead of 2x4's and we are just under $100/sq ft.  This house 5 years ago would have been $150+/sq ft.  Not sure what to do with old house as we will be building our new house in a different place closer to the home farm.  Probably rent it out for a while and then if my wife will let me tear it down.  I hate being a landlord to rental houses as it seems like there is no money to be made after you figure in the hassel.  Good luck with your decision.  My vote is to build new.