Yes it is equity, but unless your property has grown in value you would unlikely be able to borrow more money.
Related party loans are loans between related parties - spouse, family, trusts.
No you don't have to use cash.
In another post didn't you say you have equity?
Even if no equity there are related party loans you could use to mazimise deductions.
If investing in the same name then it would always be better to go for the higher return. Whether you save $1 in interest or make $1 more income it will work at the same tax wise.