Not paying cash for a house
The common opinion is an oversimplification at best. The problem with buying a house using cash is that it may leave you cash-poor, forcing you to take out a home equity loan at some point... which may be at a higher rate than the mortgage would have been. On the other hand, knowing that you have no obligation to a lender is quite nice, and many folks prefer eliminating that source of stress. IF you can get a mortgage at a sufficiently low rate, using it to leverage an investment is not a bad strategy. Average historical return on the stock market is around 8%, so any mortgage rate lower than that is a relatively good bet and a rate MUCH lower (as now) is that much better a bet. There is, of course, some risk involved and the obligation to make mortgage payments, and your actual return is reduced by what you're paying on the mortage... but it's still a pretty good deal. As far as investment vehicles: The same answers apply as always. You want a rate of return higher than what you're paying on the mortgage, preferably market rate of return or better. CDs won't do it, as you've found. You're going to have to increase the risk to increase the return. That does mean picking and maintaining a diversified balance of investments and investment types. Working with index funds makes diversifying within a type easy, but you're probably going to want both stocks and bonds, rebalancing between them when they drift too far from your desired mix.  My own investments are a specific mix with one each of bond fund, large cap fund, small cap fund, REIT, and international fund. Bonds are the biggest part of that, since they're lowest risk, but the others play a greater part in producing returns on the investments. The exact mix that would be optimal for you depends on your risk tolerance (I'm classified as a moderately aggressive investor), the time horizon you're looking at before you may be forced to pull money back out of the investments, and some matters of personal taste. I've been averaging about 10%, but I had the luxury of being able to ride out the depression and indeed invest during it. Against that, my mortgage is under 4% interest rate, and is for less than 80% of the purchase price so I didn't need to pay the surcharge for mortgage insurance. In fact, I borrowed only half the cost of the house and paid the rest in cash, specifically because leveraging does involve some risk and this was the level of risk I was comfortable with. I also set the duration of the loan so it will be paid off at about the same time I expect to retire. Again, that's very much a personal judgement. If you need specific advice, it's worth finding a financial counselor and having them help you run the numbers. Do NOT go with someone associated with an investment house; they're going to be biased toward whatever produces the most income for them. Select someone who is strictly an advisor; they may cost you a bit more but they're more likely to give you useful advice. Don't take my word for any of this. I know enough to know how little I know. But hopefully I've given you some insight into what the issues are and what questions you need to ask, and answer, before making your decisions. You could use the money to buy a couple of other (smaller) properties. Part of the rent of these properties would be used to cover the mortgage and the rest is income. Pay cash for the house but negotiate at least a 4% discount. You already made your money without having to deal with long term unknowns. I don't get why people would want invest with risk when the alternative are immediate realized gains.
Just to make the deal sweeter, see if you can negotiate a cash discount for paying for grad school with cash. If not, at least look into paying with a rewards credit card so you can get a rebate through your own means. Pay the school loan. People can default on mortgages, school loans are forever. Nothing wrong with sacrificing your dreams for a house several more years while you save. My wife and I are debt free, but it will take a few more years to save for a down payment on a house. It sure feels good knowing we don't owe anyone anything while we make our money have the purpose we want to give it. When you have to pay the bank interest, you do not have control on some of your money. Of course you don't need to take a mortgage - if you happen to have enough cash (or other assets) to pay your sister her share, or if she is willing to take it in installments over the next years. Mortgages are not needed to buy houses, but to pay for them - subtle difference. If you can pay - in whichever agreed way - without a mortgage, you won't need one. In the 2008 housing crash, cash was king.  Cash can make your mortgage payment, buy groceries, utilities, etc. Great deals on bank owned properties were available for those with cash.  Getting a mortgage in 2008-2011 was tough. If you are worried about stock market crashing, then diversification is key.  Don't have all your investments in one mutual fund or sector.   Gold and precious metals have a place in one's portfolio, say 5-10 percent as an insurance policy.  The days of using a Gold Double Eagle to pay the property taxes are largely gone, although Utah does allow it. The biggest lesson I took from the crash is you cant have too much cash saved.  Build up the rainy day fund. The other answers have offered some great advice, but here is an alternative that hasn't been mentioned yet. I'm assuming that you have an adequately-sized emergency fund in savings, and that your cars are your only non-mortgage debt. Since you still have car debt, you probably don't have anything saved for buying a new car when your current cars are at the end-of-life. Consider paying off your car loans early, then begin saving for your next car. Having cash in the bank for a car is very freeing, and it changes your mindset when it comes time to purchase a car, as it is easy to waste a lot of money on something that depreciates rapidly when you aren't paying for it immediately.  This approach might be counterintuitive if your car loan interest rate is less than your mortgage rate, but you will probably need another car before you need another house, and paying cash for a car is worth doing. The first problem is your math. Unless you are paying cash you will have a mortgage. So you'll need to add interest expense. And you will have property taxes whether you pay cash or not.   Cutting corners and delaying repairs helps with margins. So does raising the rent as often as you can.   For most Americans real estate is a store of wealth, not a generator of it. "I also feel it's important to NOT get a credit card. I'm in my mid 30's and have had credit cards since I was 20, as has everyone I know. Every single one of those people, with the exception of my dad, is currently carrying some amount of credit card debt - almost always in the thousands of dollars.  Here is the essential problem with credit cards. Everyone sets out with good intentions, to use the credit card like a debit card, and pay charges off before interest accrues. However, almost no-one has the discipline to remember to do this, and a balance quickly builds up on the card. Also, it's extremely easy to prioritize other bill payments before credit card payments, resulting in a balance building up on the card.  It's almost magical how quickly a balance will build up on a credit card. Ultimately, they are simply too convenient, too tempting for most human beings. The world, and especially the North American world, is in a massive debt crisis. It is very easy to borrow money these days, and our culture is at the point where ""buy now pay later"" is an accepted practice.  Now that I have young children, I will be teaching them the golden rule of ""don't buy something until you have cash to pay for it in full!"" It sounds like an over simplification but this one rule will save you an incredible amount of financial grief over time." "There's an old saying:  ""Never invest in anything that eats or needs maintenance."" This doesn't mean that a house or a racehorse or private ownership of your own company is not an investment.  It just points out that constant effort is needed on your part, or on the part of somebody you pay, just to keep it from losing value.  Common stock, gold, and money in the bank are three things you can buy and leave alone.  They may gain or lose market value, but not because of neglect on your part. Buying a house is a complex decision.  There are many benefits and many risks. Other investments have benefits and risks too." (Disclosure - I am a real estate agent, involved with houses to buy/sell, but much activity in rentals) I got a call from a man and his wife looking for an apartment. He introduced itself, described what they were looking for, and then suggested I google his name. He said I'd find that a few weeks back, his house burned to the ground and he had no insurance. He didn't have enough savings to rebuild, and besides needing an apartment, had a building lot to sell.  Insurance against theft may not be at the top of your list. Don't keep any cash, and keep your possessions to a minimum. But a house needs insurance for a bank to give you a mortgage. Once paid off, you have no legal obligation, but are playing a dangerous game. You are right, it's an odds game. If the cost of insurance is .5% the house value and the chance of it burning down is 1 in 300 (I made this up) you are simply betting it won't be yours that burns down.  Given that for most people, a paid off house is their largest asset, more value that all other savings combined, it's a risk most would prefer not to take.  Life insurance is a different matter. A person with no dependents has no need for insurance. For those who are married (or have a loved one), or for parents, insurance is intended to help survivors bridge the gap for that lost income. The 10-20 times income value for insurance is just a recommendation, whose need fades away as one approaches independence. I don't believe in insurance as an investment vehicle, so this answer is talking strictly term.