What can cause a change in the principal balance of a mortgage loan?

The principal balance of a mortgage loan primarily changes due to actions taken by the borrower, specifically payments made or alterations to the loan agreement, such as loan modifications. When a borrower makes a payment, a portion of that payment goes towards the principal balance, which reduces the amount owed on the loan. Additionally, if a borrower negotiates a loan modification, it may involve changes such as a reduction in the principal amount due, which directly affects the balance.

Other factors mentioned in the remaining options do not comprehensively account for significant changes to the principal balance. For instance, interest rate adjustments can affect monthly payments but do not inherently change the principal balance itself unless they are part of a refinancing process. Late fees may increase the total cost of borrowing but do not reduce the principal balance. Changes in property value might affect the equity the borrower has in the property but do not impact the actual balance of the mortgage loan. Thus, payments and modifications by the borrower are the primary drivers of change in the principal balance.