I would definitely refinance. I am in the same boat except my original rate was 5.75 and the 2 yr term is up in July. I have the same exact option to modify for .75% of loan balance to bring rate to 4.25%. I was just looking into this today for the first time which lead me to this site.
In his case, if he is fairly sure that he will be there for 2 more years and he modifies asap, he will save by dropping his rate by 2% (6.25 less 4.25) for April, May, June, and July and then 1% (5.25 less 4.25) for the next 20 months. He will save roughly 6,500 in interest for a fee of 2,100, meaning he net saves approx 4,400 by modifying.
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