Mercury 70hp 3 cycl Shaft Housing Leak

[hikermansteve]

I recently purchased a 1988 70hp Mercury 3 cycl motor. Compression was good, sea trial was good but now, getting it ready for summer I put a water collar on the motor and found 2 water leaks. One is on the back of the shaft facing the transom where the shifter comes out of the shaft and the other is a small leak where the cavitation plate tapers to the back of the housing near the transom.

It's been over 20 years since my last boat and the fact that it is a water leak tells me something is wrong. Any advice?