Teardowns are always more cost effective than such an extensive remodel. The sole factor that would be in favor of a ''remodel'' would be if the site wouldn't allow the new structure to occupy the footprint you would desire, and the existing structure is grandfathered into compliance as to siting. That can get very expensive, very quickly though. You need to consult with your local building office and a local architect.

Its always easier to demolish and rebuild. As far as costs, that may depend on your local ordinances. In California, it is considered a remodel if a certain portion/percentage of the existing structure remains. That means you do not have to comply with some of the newer and more expensive code requirements which are mandatory on new-builds. Also if the plumbing is in the existing slab and it will need to be reconfigured for your new design it may not be worth trying to use the current slab, especially if it has old copper pipes. Or if the existing slab has issues. Also, getting a variance for a remodel that already has a variance can be less of a problem here than to get new plans approved, as new build involves several more levels of scrutiny. So it all depends.