Should you cash in your RRSP to help buy a home? Part I

In Canada, you are eligible to borrow up to $20,000 from your RRSP under the "Home Buyer Plan" if you haven’t owned the home you live in over the last five years. If your spouse also has an RRSP, they can do the same, so you come up with up to $40,000 for down payment. To withdraw funds, just fill out a form T1036 and submit it to your financial institution.
IMPORTANT: by using this form you avoid it being a regular withdrawal with tax deducted from the proceeds.
Once you've made the withdrawal you have until September 30 of the following year to purchase a home. A further one-year period is allowed to move into it and make it your primary residence. This is very important too: that it be your primary residence. The money you withdraw from your RRSP is now a zero-interest loan to yourself. Repayment commences with 1/14th of the amount every year for 14 years, beginning two years after you withdrew the funds. If you don't buy a home, don't make it your primary residence, or don't pay the money back to your RRSP, then the money you withdrew will be treated as income and you will have to pay income tax on it.
Two more unique situations that you should be aware of: you cannot make a contribution to your RRSP and then immediately withdraw that same contribution under the Home Buyer's Plan. You must wait at least 90 days. This does not mean you cannot contribute to your RRSP during those 90 days, just that there must have already been enough money in the RRSP to cover your withdrawal. Finally, if you become a non-resident of Canada you will have to repay all of the money still owing to your RRSP within 60 days of leaving the country.
Next time we look at the investment implications and ask "is this really such a good deal"?