hi debbie, i was asking myself the same questions as yourself before i noticed your posting. I too have a mining town property thats boom in south hedland, and was thinking of selling that to pay off my debts also.
my general thoughts were – i think the mining towns have peaked (for now, until the next 7-10year boom) and i do believe we are headed for a down turn, and i also have a negative geared property. If you sell i believe you would lose about 25- 30% approx of your profit (please correct me if im wrong – 50% of profit is CGT and then you get taxed 47% on that CGT (depending on tax bracket) = 25% off profit then + selling cost etc)

you would then take that profit in put it into your negative geared property. For me its like swapping your positive cash flow mining property with a property in a good location and better chance of capital gains (which is now a positive cash flow after you use profits to reduce debts).

my main concern is if interest rates go crazy again like15% type crazy. +ve geared properties will not be affected that much though so it is safe to hold, but how many -ve geared properties can you hold? (not many)

but im still just as confused as you
all the best

equity is important because it allows you to use the greater amount of equity to purchase more houses. The way the banks work is generally they will lend you 80-95% LVR. So for instance you have the $200K and paid of the 50K with no growth in value then your LVR is at 75% however if its gone up 50K to $250 then your LVR is at 60%. If you bought another house with using only 50K equity it would probably push your LVR over 80% which means you would have to pay the LMI fee, whereas if you had 100K equity you wouldnt have to pay this fee.
correct me if im wrong anyone