The primary purpose of the money (CPF) is for a basic level of retirement fund. Money taken out means it is not earning interest, and thus its real value will not be maintain in the future when it is paidout (in CPF Life). If someone had sold off his property (for a profit) after decades of using CPF monies to pay for it, And only returns the principle, and somehow mismanages his money and spent most of it away (before he even reaches retirement). His retirement CPF money is now of significant lower real value to depend on in future. 2.5% accrued interest over decades can be very significant, and that is the purpose to protect (at the very basic level) your retirement funds. Think of that same example, but he had to return principle plus accrued interest, and he will have less available cash on hand to spend. The CPF money is protected will continue to earn guaranteed interest. Albeit, we still can use the OA again to purchase another property. Bear in mind, if your property sold is not enough to return the full amount (principle + accrued interest), you will not need to pay any additional cash. It is a basic policy to safeguard your basic retirement funds. Not everyone will be able to manage their money well. Paying the mortgage interest is a separate issue as you are borrowing money you do not have. You could also choose to borrow from bank at a potential lower rate.