principal balance

Usually people tap into the equity they have built for home and do "cash out refinancing". This way you can refinance for a higher amount than your current principal balance and get some extra money as cash.

The money you receive is a lump sum amount and can be used for anything.

The lender does NOT lower your principal balance unless you negotiate it. You have to have an understanding of your credit history before agreeing to a loan modification.

Is the lender losing any money?