Simulation analysis of a modified balanced PSK homodyne coherent optical receiver has been investigated taking into account laser phase noise, photo detectors shot noise and loop propagation delay. This modified loop contains all the components of a standard balanced optical phase-locked loop in conjunction of an additional phase modulator. This modified homodyne receiver offers a much improved tracking performance and also shows good improvements in the reduction performance over previously reported methods, like, improved receiver stability, relaxed line-width requirement, increased power sensitivity and improved lock-in range.