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Should the water pump housing have a gasket, or is that what the metal shim is doing. I have water getting in my lower unit and trying to find where. Just seems to a new person that it should have some kind of sealer in it.
Gasket? Depends on the engine. Most do not incorporate a gasket.
The 1964 40hp does not use a gasket. Apply sealant between the water pump plate (not a shim) and the lower unit surface and between the impeller housing and the plate.
