I have a 1996 Mercury 150 XR6. I'm having water ingestion issues. I've priced out remanufactured lower units. Good ones are expensive. Mercury wants $3126 and Jasper wants $3218. For those with experience rebuilding is it cheaper to rebuild the one you have? Any recommendations on shops who are good at lower units and fairly priced?

We can reseal your lower unit for you that cheaper than a reman are new lower unit. if ship to me we can if get a quick turn around for you

I;m not giving complete story.About 5 years ago I had the lower unit inspected because I was getting a clunk while in forward gear.They told me that everything looked good, to check the shifter cable adjustment. I went through this procedure and this took care of that concern. I do remember they had a hard time sealing it. But they never told me details.Anyhow last time I used boat I noticed a oil leak at prop. I pulled prop and prop seals had some oil around them. I can see movement near seal area when I put up and down pressure on it.So I'm not sure if I need new bearings and or prop shaft to tighten up this movement.It's served me well and most likely needs more than seals after 20 years of my lead foot!

I found a couple new lower units that were both under 2000 dollars that would fit your motor.
I don't know if they had the 1:78 gearcase when your motor was sold but even if it is one you can still use the 1:87 gearcase. The 1:78 is generally faster since it has a smaller diameter bullet but that case is old technology and they fazed them out.

A friend of mine rebuilds motors and lower units. Bobby is very good at it. PM me if you want his number. He could give you advice as to whether its worth opening it up or not. I believe that is what I would do.
You can find used decent lower units for well under a grand that would work on your boat. Be careful here as some people sell you stuff that isn't right.

Have you tried looking at the lower unit gear lube? When was the last time you changed it? It will be milky or you will see water in the drippings if its been sitting there days after using the motor. That would indicate the seals need to be addressed. If there is any metal other than fine flecks it should be taken apart to see what parts are wearing.

That lower can be rebuilt with new gears and shift dog, new carrier and all new seals for right at 1200.00 I am including the carrier because the previous shop had problems with seals. the main shaft and shift shaft are not as problematic.