Unable to fully maximize Terminal window

Terminal windows are always sized to show full text lines (you can check this by resizing the window manually to see that it resizes in steps), so for example if your text height in Terminal is 10pt and your screen height is 1275pt there will be a 5pt gap at the bottom (numbers not real and ignoring menu bar, window title etc, just to show the principle).

As @nohillside said in his answer, the font settings has to match perfectly a line in order to have a real fullscreen.

So you can tweak Font size and Line Spacing in order to find a "line perfect" setup (tips: put a white window behind your terminal to easily set it up)

I tried many fixed width fonts (SF Mono, Monaco, Menlo, PT Mono), and here a setup that worked for me:

• macOS: 10.15.7
• Screen: 1920x1080 (16/9)
• Tab Bar: Always shown (View > Show Tab Bar)
• Font: Menlo Regular
• Font Size: 14
• Character Spacing: 1.046
• Line Spacing: 1

Note that Character Spacing does not impact the height, it is just more confortable to me.

Because my Macbook is 16/10 I still have a slight gap on it, but it is perfect on my external monitors.

If you have any other setup that works for you feel free to comment on this post