Equity is the difference between what you owe & what the home is worth or appraised at now.

There are many programs for "cashing out" equity. You could get up to 100% of your equity out. I do not suggest this &your interest rate on your equity loan will be a lot higher.

You could cash out say 80%, based on my #'s above that would total about $164,000.

& you could use this money towards a down payment & for construction costs with the home you're interested in building.

You want to make sure you're using your money with the best programs. Talk to a lender who will show you the pros & cons. Don't use all of your liquid cash to sink into building a home, leverage, leverage, leverage & talk to the lender about a "Construction to Perm" loan. (Construction to finished product)