[jIM_Ohio]

I see problems as 3 fold:

1) you have a budgeting and cash flow issue which needs immediate attention
2) you have a short term need for lots of cash on hand (job loss)
3) you have a long term need to make sure you have assets to live off of in retirement.

You did not state where you live. My ideas are this:

Sell house and pocket ~400k. This removes your largest liability. Buy something modest for 200k and invest the rest for retirement. This removes the mortgage payment from the budget and should smooth over impending unemployment.

Opposite idea is is to refinace at 30 year fixed. The $700 payment will be around $90 towards principal and $610 towards interest. You will probably not pay off the house until you either move or die. This delays a problem at a relatively high current expense.

You did not list the current mortgage payment. I might consider a 15 year fixed before I refinanced a loan with only 10 years left. or look for a 10/1 ARM and see if that gives better results.

I would focus on problems 2 and 3 more than 1. Get cash on hand to whether the unemployment. Work a second job, get a roomate or something similar. A 600k house for one person is quite large- do you really need that much space?

I would also look for retirement needs. If you make 40k now and have 40k in expenses, you will need $1 M to retire. If you invest around 200k of the house, it will could be 800k in 12-16 years which could allow you to retire without any loss of spending.

If same 200k is kept in the house equity, you are looking at a 500k house appreciating at around 3%- in 24 years that house would sell for $1 M. In this situation you would need to live in house, work, and pay taxes for 24 years to retire with same standard of living you have now.

I assume the divorce is tough on you emotionally. I feel for the issues this causes. My advice is decide now what you want out of life. Now and in next 12 years and when you retire around age 65. Then look at what it takes to make that happen.

Don't let the short term cash flow issues be the problem you solve, use this as an opportunity to get out of life what it is that matters most to you.